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The distribution of standardized futures price changes

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  • Meenakshi Venkateswaran
  • B. Wade Brorsen
  • Joyce A. Hall

Abstract

The observed non-normality of futures price changes has been attributed to non-constant variance. This paper tests whether the non-normality is due to changing variances or additional factors. The data are adjusted for heteroskedasticity and the stability-under-addition test of stable distributions performed on the original and the rescaled data sets. Rescaled data are less leptokurtic than the original data, but the rescaled data are still not normal. Thus, factors other than changing variance may also be responsible for the observed leptokurticity of daily futures returns.
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Suggested Citation

  • Meenakshi Venkateswaran & B. Wade Brorsen & Joyce A. Hall, 1993. "The distribution of standardized futures price changes," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 13(3), pages 279-298, May.
    • Handle: RePEc:wly:jfutmk:v:13:y:1993:i:3:p:279-298
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    1. Hall, Joyce A. & Brorsen, B. Wade & Irwin, Scott H., 1989. "The Distribution of Futures Prices: A Test of the Stable Paretian and Mixture of Normals Hypotheses," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(1), pages 105-116, March.
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    5. Eugene F. Fama, 1963. "Mandelbrot and the Stable Paretian Hypothesis," The Journal of Business, University of Chicago Press, vol. 36, pages 420-420.
    6. Epps, Thomas W & Epps, Mary Lee, 1976. "The Stochastic Dependence of Security Price Changes and Transaction Volumes: Implications for the Mixture-of-Distributions Hypothesis," Econometrica, Econometric Society, vol. 44(2), pages 305-321, March.
    7. McCulloch, J. Huston, 1985. "Interest-risk sensitive deposit insurance premia : Stable ACH estimates," Journal of Banking & Finance, Elsevier, vol. 9(1), pages 137-156, March.
    8. Bollerslev, Tim, 1987. "A Conditionally Heteroskedastic Time Series Model for Speculative Prices and Rates of Return," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 542-547, August.
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    2. Ram Bhar, 1994. "Modelling Yen Futures Return Using Daily Data From IMM and Simex," Working Paper Series 39, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
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    4. Raymond Knott & Marco Polenghi, 2006. "Assessing central counterparty margin coverage on futures contracts using GARCH models," Bank of England working papers 287, Bank of England.

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