Student't mixture models for stock indices. A comparative study

Author:

Till Massing, Arturo Ramos

Keyword:

Economics, General Economics, General Economics (econ.GN)

journal:

Physica A: Statistical Mechanics and its Applications, 580, 126143 (2021)

date:

2023-08-18 16:00:00

Abstract

We perform a comparative study for multiple equity indices of different countries using different models to determine the best fit using the Kolmogorov-Smirnov statistic, the Anderson-Darling statistic, the Akaike information criterion and the Bayesian information criteria as goodness-of-fit measures. We fit models both to daily and to hourly log-returns. The main result is the excellent performance of a mixture of three Student's $t$ distributions with the numbers of degrees of freedom fixed a priori (3St). In addition, we find that the different components of the 3St mixture with small/moderate/high degree of freedom parameter describe the extreme/moderate/small log-returns of the studied equity indices.

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