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The empirical distribution of stock returns: evidence from an emerging European market

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  • Richard Harris
  • C. Coskun Kucukozmen

Abstract

There is now substantial evidence that daily equity returns are not normally distributed, but instead display significant leptokurtosis and, in many cases, skewness. Considerable effort has been made in order to capture these empirical characteristics using a range of statistical distributions. However, the evidence to date is confined entirely to the returns of developed stock markets, and in particular to the USA. In this paper, the daily returns of a large emerging European stock market, Turkey, are modelled. Two very flexible families of distributions that have recently been introduced are employed: the exponential generalized beta (EGB) and the skewed generalized t (SGT). These distributions permit very diverse levels of skewness and kurtosis and, between them, nest most of the distribution previously considered in the literature.

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  • Richard Harris & C. Coskun Kucukozmen, 2001. "The empirical distribution of stock returns: evidence from an emerging European market," Applied Economics Letters, Taylor & Francis Journals, vol. 8(6), pages 367-371.
    • Handle: RePEc:taf:apeclt:v:8:y:2001:i:6:p:367-371
    DOI: 10.1080/135048501750237793
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    Cited by:

    1. Menezes, Carmen F. & Wang, X.Henry, 2005. "Increasing outer risk," Journal of Mathematical Economics, Elsevier, vol. 41(7), pages 875-886, November.
    2. W. D. Walls, 2005. "Modelling heavy tails and skewness in film returns," Applied Financial Economics, Taylor & Francis Journals, vol. 15(17), pages 1181-1188.
    3. Alexander Eastman & Brian Lucey, 2008. "Skewness and asymmetry in futures returns and volumes," Applied Financial Economics, Taylor & Francis Journals, vol. 18(10), pages 777-800.
    4. Saadet Kirbas-Kasman & Adnan Kasman, 2003. "Volatility of ISE and Business Cycle," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 3(1), pages 67-84.
    5. Gangadhar Nayak & Subhranshu Sekhar Tripathy & Agbotiname Lucky Imoize & Chun-Ta Li, 2024. "Application of Extended Normal Distribution in Option Price Sensitivities," Mathematics, MDPI, vol. 12(15), pages 1-18, July.
    6. Rodolfo Aquino, 2006. "Efficiency of the Philippine stock market," Applied Economics Letters, Taylor & Francis Journals, vol. 13(7), pages 463-470.
    7. John Douglas (J.D.) Opdyke, 2007. "Comparing Sharpe ratios: So where are the p-values?," Journal of Asset Management, Palgrave Macmillan, vol. 8(5), pages 308-336, December.

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