Title
Stable Paretian Versus Student’s t Stock Market Hypothesis
Document Type
Article
Publication Date
1-1-2013
Journal / Book Title
Journal of Statistical Theory and Practice
Abstract
This article investigates the types of probability distributions that can best represent equity returns using a large sample of daily S&P500 index returns. The competing models, Stable Paretian and Pearson families, are compared using Bayesian methods. The evidence against Stable Paretian as a model of S&P500 index returns is overwhelming. The distribution that best fits the data is Pearson Type IV, and Student's t fits almost as well. One implication is that a Bayesian decision maker should strongly shift beliefs in favor of a Pearson distribution with finite means and variances as a model of daily changes in the S&P500 stock index.
DOI
10.1080/15598608.2012.756321
MSU Digital Commons Citation
Alparslan, Artun; Tessitore, Anthony; and Usmen, Nilufer, "Stable Paretian Versus Student’s t Stock Market Hypothesis" (2013). Department of Accounting and Finance Faculty Scholarship and Creative Works. 102.
https://digitalcommons.montclair.edu/acctg-finance-facpubs/102
Published Citation
Alparslan, A., Tessitore, A., & Usmen, N. (2013). Stable Paretian Versus Student’st Stock Market Hypothesis. Journal of Statistical Theory and Practice, 7(1), 133-145.