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Journal of Statistical Theory and Practice

, Volume 2, Issue 2, pp 233–251 | Cite as

Empirical Evidence on Student-t Log-Returns of Diversified World Stock Indices

Article

Abstract

The aim of this paper is to document some empirical facts related to log-returns of diversified world stock indices when these are denominated in different currencies. Motivated by earlier results, we have obtained the estimated distribution of log-returns for a range of world stock indices over long observation periods. We expand previous studies by applying the maximum likelihood ratio test to the large class of generalized hyperbolic distributions, and investigate the log-returns of a variety of diversified world stock indices in different currency denominations. This identifies the Student-t distribution with about four degrees of freedom as the typical estimated log-return distribution of such indices. Owing to the observed high levels of significance, this result can be interpreted as a stylized empirical fact.

Key-words

Diversified world stock index growth optimal portfolio log-return distribution Student-t distribution generalized hyperbolic distribution likelihood ratio test 

AMS Subject Classification

62F03 62P20 91B28 

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Copyright information

© Grace Scientific Publishing 2008

Authors and Affiliations

  1. 1.School of Finance and Economics and Department of Mathematical SciencesUniversity of TechnologySydneyAustralia
  2. 2.School of Finance and EconomicsUniversity of TechnologySydneyAustralia

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