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Laplace-Weibull Mixtures for Modeling Price Changes

Author

Listed:
  • S. T. Rachev

    (Department of Statistics and Applied Probability, University of California, Santa Barbara, Santa Barbara, California 93106)

  • A. SenGupta

    (Department of Statistics and Applied Probability, University of California, Santa Barbara, Santa Barbara, California 93106)

Abstract

B. Mandelbrot and E. Fama in the sixties, and W. Ziemba in the seventies, suggested stable laws for modeling stock returns and commodity prices. Geometric stable distributions, with Laplace distribution playing the role of a "normal" law, have been found to give better fit to such data. We study the "stability" properties of Laplace and a mixture of Laplace and Weibull and discuss the statistical inference for such mixture models. Application of the mixture distribution to modeling price changes in real estate prices in France is given.

Suggested Citation

  • S. T. Rachev & A. SenGupta, 1993. "Laplace-Weibull Mixtures for Modeling Price Changes," Management Science, INFORMS, vol. 39(8), pages 1029-1038, August.
    • Handle: RePEc:inm:ormnsc:v:39:y:1993:i:8:p:1029-1038
    DOI: 10.1287/mnsc.39.8.1029
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    Cited by:

    1. Chen, Kim Heng & Jandhyala, Venkata K. & Fotopoulos, Stergios B., 2005. "Nonlinear Properties of Multifactor Financial Models," Review of Applied Economics, Lincoln University, Department of Financial and Business Systems, vol. 1(2), pages 1-27.
    2. Kozubowski, Tomasz J. & Meerschaert, Mark M. & Panorska, Anna K. & Scheffler, Hans-Peter, 2005. "Operator geometric stable laws," Journal of Multivariate Analysis, Elsevier, vol. 92(2), pages 298-323, February.
    3. Punzo, Antonio & Bagnato, Luca, 2021. "Modeling the cryptocurrency return distribution via Laplace scale mixtures," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 563(C).

    More about this item

    Keywords

    stable distribution; E-M algorithm;

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