Numerous articles have investigated the distribution of share prices, and find that the yields are leptokurtic. There is still controversy about the amount of leptokurtosis, and hence about the most appropriate distribution to use in modeling returns. This controversy has proven hard to resole, as the alternatives are non-nested. We propose to employ extreme value theory focusing exclusively on the larger observations, in order to assess the leptokurtosis within a unified framework. This enables one to generate robust probabilities on large changes, which put the recent stock market swings into historical perspective.
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