Article1995

Modelling Skewness and Kurtosis in the London Stock Exchange FT-SE Index Return Distributions

106 citations0/0 files storedJournal of the Royal Statistical Society Series D (The Statistician)

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Financial Risk and Volatility Modeling Stochastic processes and financial applications Complex Systems and Time Series Analysis

Abstract

This paper provides an empirical examination of the distribution of daily returns to the three London Stock Exchange indices, the FT-SE 100, Mid 250 and the 350, over the period 1986-92. Empirical densities are fitted to each of the return distributions before their shapes are explored by using Tukey's g- and h-distributions. The returns are characterized by highly non-Gaussian behaviour, being both skewed and extremely kurtotic, although the shapes of the distributions depend on whether data from 1986 and 1987 are included or not. Some implications for portfolio analysis are drawn.

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References

1984Models of Stock Returns--A Comparison 1978Diversification in a Three-Moment World 1988The Stable-Law Model of Stock Returns 1986Skewness Persistence in Common Stock Returns 1988On Measuring Skewness and Elongation in Common Stock Return Distributions: The Case of the Market Index

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