Multiple structural changes in the tail behavior: Evidence from stock index futures returns

作者：Lin C H^*; Kao T C

来源：Nonlinear Analysis: Real World Applications , 2008, 9(4): 1702-1713.

DOI：10.1016/j.nonrwa.2007.05.011

• multiple structural changes
• extreme value analysis
• tail-index

The study provides an approach of nonlinear analysis for detecting multiple structural changes in the tails of financial returns distributions. The proposed approach can simultaneously determine the number of structural breaks in a series of tail-indexes and estimate the mean tail-index levels in distinct regimes. The method is applied to the tail behavior of DJIA futures returns. The sample period covered various recent financial crises, and ran from October 1999 to December 2003, enabling assessment of the relationships between changes in the tail shape of returns distribution and known extreme events in financial markets. The empirical results demonstrate the existence of at least one break point in the left and common tails of the DJIA futures returns distribution during the sample period, and the mean tail-index levels in different regimes classified by estimated break points display an increase in the left and common tails that coincides the phenomenon of gradually decreasing financial turbulence in DJIA futures contracts. The empirical evidence indicates that the structural changes in the tail behavior of the distribution of DJIA futures returns are associated more with negative shocks than positive ones, creating differences in risk management between long and short investors in futures markets.

• 出版日期2008-9