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Return interval, dependence structure, and multivariate normality

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  • Thierry Ané
  • Chiraz Labidi

Abstract

We focus on changes in the multivariate distribution of index returns stemming purely from varying the return interval, assuming daily to quarterly returns. Whereas long-tailedness is present in daily returns, we find that, in agreement with a well-established idea, univariate return distributions converge to normality as the return interval is lengthened. Such convergence does not occur, however, for multivariate distributions. Using a new method to parametrically model the dependence structure of stock index returns, we show that the persistence of a dependence structure implying negative asymptotic dependence in return series is the reason for the rejection of multivariate normality for low return frequencies. Copyright Academy of Economics and Finance 2004

Suggested Citation

  • Thierry Ané & Chiraz Labidi, 2004. "Return interval, dependence structure, and multivariate normality," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 28(3), pages 285-299, September.
    • Handle: RePEc:spr:jecfin:v:28:y:2004:i:3:p:285-299
    DOI: 10.1007/BF02751733
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    3. Arditti, Fred D & Levy, Haim, 1975. "Portfolio Efficiency Analysis in Three Moments: The Multiperiod Case," Journal of Finance, American Finance Association, vol. 30(3), pages 797-809, June.
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    More about this item

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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