Robustly Modelling the Scale and Shape Dynamics of Stock Return Distributions

Griffin, Jim E. and Mitrodima, Evangelia and Oberoi, Jaideep S (2018) Robustly Modelling the Scale and Shape Dynamics of Stock Return Distributions. Working paper. tbc https://doi.org/10.2139/ssrn.2777214. (Unpublished) (doi:https://doi.org/10.2139/ssrn.2777214) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided)

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Official URL
https://dx.doi.org/10.2139/ssrn.2777214

Abstract

We explore time variation in the shape of the conditional return distribution using a model of multiple quantiles. We propose a joint model of scale (proxied by the interquartile range) and other quantiles standardised by the scale. The model allows us to capture the scale and shape of the distribution in one step without making assumptions about the distribution of the underlying conditional shocks from the outset. We find that, once we capture the dynamics of the scale effectively, the time variation in the shape allows a simpler interpretation. The method is illustrated by application to stock price and stock index data and provides evidence that the conditional return distribution becomes heavier tailed at times of market stress.

Item Type: Monograph (Working paper)
Divisions: Faculties > Sciences > School of Mathematics Statistics and Actuarial Science > Actuarial Science
Faculties > Sciences > School of Mathematics Statistics and Actuarial Science > Statistics
Faculties > Social Sciences > Kent Business School > Accounting and Finance
Depositing User: Jaideep S Oberoi
Date Deposited: 04 Dec 2018 17:44 UTC
Last Modified: 05 Dec 2018 12:07 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/70635 (The current URI for this page, for reference purposes)
Oberoi, Jaideep S: https://orcid.org/0000-0002-1101-7612
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