An empirical evaluation of fat-tailed distributions in modeling financial time series

作者：So, Mike K P; Chen, Cathy W S^*; Lee, Jen Yu; Chang, Yi Ping

来源：Mathematics and Computers in Simulation, 2008, 77(1): 96-108.

DOI：10.1016/j.matcom.2007.02.008

• Bayesian
• GARCH models
• generalized error distribution
• reversible-jump

There is substantial evidence that many financial time series exhibit leptokurtosis and volatility clustering. We compare the two most commonly used statistical distributions in empirical analysis to capture these features: the I distribution and the generalized error distribution (GED). A Bayesian approach using a reversible-jump Markov chain Monte Carlo method and a forecasting evaluation method are adopted for the comparison. In the Bayesian evaluation of eight daily market returns, we find that the fitted t error distribution outperforms the GED. In terms of volatility forecasting, models with t innovations also demonstrate superior out-of-sample performance.

• 出版日期2008-2-15
• 单位苏州大学; 香港科技大学