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ANALYZING FAT-TAILED DISTRIBUTIONS IN EMERGING CAPITAL MARKETS

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Author(s): FELICIA RAMONA BIRAU

Journal: Challenges of the Knowledge Society
ISSN 2068-7796

Volume: 3;
Issue: -;
Start page: 1026;
Date: 2013;
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Keywords: Non-normal distribution | estimation | statistical inference | asymmetric volatility | fat-tailed distributions | stable-Paretian distributions

ABSTRACT
The aim of this article focuses on analyzing the implications of fat-tailed distributions in emerging capital markets. An essential aspect that was highlighted by most empirical research, especially in terms of emerging capital markets, emphasizes the fact that extreme financial events can not be accurately predicted by the normal distribution. Fat-tailed distributions establish a very effective econometric tool in the analysis of rare events which are characterized by extreme values that occur with a relatively high frequency .The importance of exploring this particular issue derives from the fact that it is fundamental for optimal portfolio selection, derivatives valuation, financial hedging and risk management strategies. The implications of fat-tailed distributions for investment process are significant especially in the turbulent context of the global financial crisis.

Tango Jona
Tangokurs Rapperswil-Jona

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