The distribution of stock returns

New evidence against the stable model

Amy Hing Ling Lau, Hon Shiang Lau, John R. Wingender

Research output: Contribution to journalArticle

58 Citations (Scopus)

Abstract

We present a simple but effective procedure for determining whether a reasonably large sample comes from a stable population against the alternative that it comes from a population with finite higher moments. The procedure uses the fact that a stable population sample has moments of the fourth and sixth order whose magnitudes increase very rapidly as the sample size increases. This procedure shows convincingly that stock returns, when taken as a group, do not come from stable populations. Even for individual stocks, our results show that the stable-population- model null hypothesis can be rejected for more than 95% of the stocks.

Original languageEnglish
Pages (from-to)217-223
Number of pages7
JournalJournal of Business and Economic Statistics
Volume8
Issue number2
DOIs
StatePublished - 1990
Externally publishedYes

Fingerprint

Stock Returns
Stable Models
evidence
Moment
Population Model
Null hypothesis
Sample Size
Evidence
Stock returns
Alternatives
Group

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty
  • Social Sciences (miscellaneous)

Cite this

The distribution of stock returns : New evidence against the stable model. / Lau, Amy Hing Ling; Lau, Hon Shiang; Wingender, John R.

In: Journal of Business and Economic Statistics, Vol. 8, No. 2, 1990, p. 217-223.

Research output: Contribution to journalArticle

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