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Modelling and forecasting the kurtosis and returns distributions of financial markets: irrational fractional Brownian motion model approach

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journal contribution
posted on 2019-08-16, 16:03 authored by Gurjeet Dhesi, Bilal Shakeel, Marcel Ausloos
This paper reports a new methodology and results on the forecast of the numerical value of the fat tail(s) in asset returns distributions using the irrational fractional Brownian motion model. Optimal model parameter values are obtained from fits to consecutive daily 2-year period returns of S&P500 index over [1950–2016], generating 33-time series estimations. Through an econometric model, the kurtosis of returns distributions is modelled as a function of these parameters. Subsequently an auto-regressive analysis on these parameters advances the modelling and forecasting of kurtosis and returns distributions, providing the accurate shape of returns distributions and measurement of Value at Risk.

History

Citation

Annals of Operations Research, 2019

Author affiliation

/Organisation/COLLEGE OF SOCIAL SCIENCES, ARTS AND HUMANITIES/School of Business

Version

  • VoR (Version of Record)

Published in

Annals of Operations Research

Publisher

Springer (part of Springer Nature)

issn

0254-5330

eissn

1572-9338

Copyright date

2019

Available date

2019-08-16

Publisher version

https://link.springer.com/article/10.1007/s10479-019-03305-z

Language

en

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