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The Distribution of Stock Market Returns: Tests of Normality

Author

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  • Michael D. Stokie

    (Deakin University, Geelong. Comments and suggestions by R. Ball, R. Officer, P. Praetz and the referee are gratefully acknowledged. I am indebted to P. Brown for permission to use his data file on Industrial securities 1958–1973.)

Abstract

The adequacy of the normal distribution as a representation for security returns is reconsidered. Findings of non-normality in earlier tests are attributed to a high incidence of zero returns and parameter non-stationarity. Monthly log-returns of leading Australian securities over five-year periods are compatible with the normal distribution.

Suggested Citation

  • Michael D. Stokie, 1982. "The Distribution of Stock Market Returns: Tests of Normality," Australian Journal of Management, Australian School of Business, vol. 7(2), pages 159-178, December.
  • Handle: RePEc:sae:ausman:v:7:y:1982:i:2:p:159-178
    DOI: 10.1177/031289628200700205
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    References listed on IDEAS

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    1. 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.
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    Cited by:

    1. Xin Ling, 2017. "Normality of stock returns with event time clocks," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57, pages 277-298, April.

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