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Aggregational Gaussianity And Barely Infinite Variance In Crop Prices

Author

Listed:
  • Antonios Antypas

    (Department of Banking and Financial Management, University of Piraeus)

  • Phoebe Koundouri

    (Dept. of International and European Economic Studies, Athens University of Economics and Business)

  • Nikolaos Kourogenis

    (Department of Banking and Financial Management, University of Piraeus.)

Abstract

This paper aims at reconciling two apparently contradictory empirical regularities of financial returns, namely the fact that the empirical distribution of returns tends to normality as the frequency of observation decreases (aggregational Gaussianity) combined with the fact that the conditional variance of high frequency returns seems to have a unit root, in which case the unconditional variance is infinite. We show that aggregational Gaussianity and infinite variance can coexist, provided that all the moments of the unconditional distribution whose order is less than two exist. The latter characterises the case of Integrated GARCH (IGARCH) processes. Finally, we discuss testing for aggregational Gaussianity under barely infinite varian

Suggested Citation

  • Antonios Antypas & Phoebe Koundouri & Nikolaos Kourogenis, 2010. "Aggregational Gaussianity And Barely Infinite Variance In Crop Prices," DEOS Working Papers 1001, Athens University of Economics and Business.
    • Handle: RePEc:aue:wpaper:1001
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    File URL: http://wpa.deos.aueb.gr/docs/CropsIGARCH2010_01_23.pdf
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    References listed on IDEAS

    as
    1. Drost, Feike C & Nijman, Theo E, 1993. "Temporal Aggregation of GARCH Processes," Econometrica, Econometric Society, vol. 61(4), pages 909-927, July.
    2. Blattberg, Robert C & Gonedes, Nicholas J, 1974. "A Comparison of the Stable and Student Distributions as Statistical Models for Stock Prices," The Journal of Business, University of Chicago Press, vol. 47(2), pages 244-280, April.
    3. Clark, Peter K, 1973. "A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices," Econometrica, Econometric Society, vol. 41(1), pages 135-155, January.
    4. Carrasco, Marine & Chen, Xiaohong, 2002. "Mixing And Moment Properties Of Various Garch And Stochastic Volatility Models," Econometric Theory, Cambridge University Press, vol. 18(1), pages 17-39, February.
    5. Nikolaos Kourogenis & Nikitas Pittis, 2008. "Testing for a unit root under errors with just barely infinite variance," Journal of Time Series Analysis, Wiley Blackwell, vol. 29(6), pages 1066-1087, November.
    6. Nikolaos Kourogenis & Nikitas Pittis, 2011. "Mixing Conditions, Central Limit Theorems, and Invariance Principles: A Survey of the Literature with Some New Results on Heteroscedastic Sequences," Econometric Reviews, Taylor & Francis Journals, vol. 30(1), pages 88-108.
    7. Benoit Mandelbrot, 2015. "The Variation of Certain Speculative Prices," World Scientific Book Chapters, in: Anastasios G Malliaris & William T Ziemba (ed.), THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 3, pages 39-78, World Scientific Publishing Co. Pte. Ltd..
    8. Francq, Christian & Zakoïan, Jean-Michel, 2006. "Mixing Properties Of A General Class Of Garch(1,1) Models Without Moment Assumptions On The Observed Process," Econometric Theory, Cambridge University Press, vol. 22(5), pages 815-834, October.
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    Cited by:

    1. Phoebe Koundouri & Nikolaos Kourogenis & Nikitas Pittis, 2012. "Statistical Modeling of Stock Returns: A Historical Survey with Methodological Reflections," DEOS Working Papers 1226, Athens University of Economics and Business.

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    More about this item

    Keywords

    aggregational Gausianity; infinite variance; IGARCH; crop prices;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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