Infinite density at the median and the typical shape of stock return distributions
Infinite density at the median and the typical shape of stock return distributions
Statistics are developed to test for the presence of an asymptotic discontinuity (or infinite density or peakedness) in a probability density at the median. The approach makes use of work by Knight (1998) on L1 estimation asymptotics in conjunction with nonparametric kernel density estimation methods. The size and power of the tests are assessed, and conditions under which the tests have good performance are explored in simulations. The new methods are applied to stock returns of leading companies across major U.S. industry groups. The results confirm the presence of infinite density at the median as a new significant empirical evidence for stock return distributions.
asymptotic leptokurtosis, infinite density at the median, kernel density estimation, least absolute deviations, stylized facts
282-294
Han, C.
fd5b11fe-fccf-4e00-ad20-9d1a4e528f1a
Cho, J.S.
5634fe40-f3e7-4245-9910-84d90cf63237
Phillips, Peter C.B
f67573a4-fc30-484c-ad74-4bbc797d7243
2011
Han, C.
fd5b11fe-fccf-4e00-ad20-9d1a4e528f1a
Cho, J.S.
5634fe40-f3e7-4245-9910-84d90cf63237
Phillips, Peter C.B
f67573a4-fc30-484c-ad74-4bbc797d7243
Han, C., Cho, J.S. and Phillips, Peter C.B
(2011)
Infinite density at the median and the typical shape of stock return distributions.
Journal of Business and Economic Statistics, 29 (2), .
(doi:10.1198/jbes.2010.07327).
Abstract
Statistics are developed to test for the presence of an asymptotic discontinuity (or infinite density or peakedness) in a probability density at the median. The approach makes use of work by Knight (1998) on L1 estimation asymptotics in conjunction with nonparametric kernel density estimation methods. The size and power of the tests are assessed, and conditions under which the tests have good performance are explored in simulations. The new methods are applied to stock returns of leading companies across major U.S. industry groups. The results confirm the presence of infinite density at the median as a new significant empirical evidence for stock return distributions.
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Published date: 2011
Keywords:
asymptotic leptokurtosis, infinite density at the median, kernel density estimation, least absolute deviations, stylized facts
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Local EPrints ID: 157291
URI: http://eprints.soton.ac.uk/id/eprint/157291
ISSN: 0735-0015
PURE UUID: 4d6b5a56-dd45-4d28-9dba-35350d0b84ca
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Date deposited: 04 Jun 2010 11:12
Last modified: 14 Mar 2024 01:47
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Author:
C. Han
Author:
J.S. Cho
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