The art of fitting financial time series with Levy stable distributions

Scalas, Enrico and Kim, Kyungsik (2006): The art of fitting financial time series with Levy stable distributions. Unpublished.

Abstract

This paper illustrates a procedure for fitting financial data with alpha-stable distributions. After using all the available methods to evaluate the distribution parameters, one can qualitatively select the best estimate and run some goodness-of-fit tests on this estimate, in order to quantitatively assess its quality. It turns out that, for the two investigated data sets (MIB30 and DJIA from 2000 to present), an alpha-stable fit of log-returns is reasonably good.

• Item Type: MPRA Paper
• Additional Information: Paper presented at the DDAP4 conference, Pohang, Korea, July 2006 http://www.apctp.org/conferences/ddap4/?page=main
• Language: English
• Keywords: finance; statistical methods; stable distributions
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C14 - Semiparametric and Nonparametric Methods; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C16 - Specific Distributions; G - Financial Economics > G0 - General > G00 - General

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