The $\kappa$-generalised Distribution for Stock Returns
Statistical Finance
2024-05-17 v1 Applications
Abstract
Empirical evidence shows stock returns are often heavy-tailed rather than normally distributed. The -generalised distribution, originated in the context of statistical physics by Kaniadakis, is characterised by the -exponential function that is asymptotically exponential for small values and asymptotically power law for large values. This proves to be a useful property and makes it a good candidate distribution for many types of quantities. In this paper we focus on fitting historic daily stock returns for the FTSE 100 and the top 100 Nasdaq stocks. Using a Monte-Carlo goodness of fit test there is evidence that the -generalised distribution is a good fit for a significant proportion of the 200 stock returns analysed.
Keywords
Cite
@article{arxiv.2405.09929,
title = {The $\kappa$-generalised Distribution for Stock Returns},
author = {Samuel Forbes},
journal= {arXiv preprint arXiv:2405.09929},
year = {2024}
}