On the goodness-of-fits of the generalized lambda distribution on high-frequency stock index returns
In this paper, we investigate the goodness-of-fit of the flexible four-parameter generalized Lambda Distribution (GLD) for high-frequency 5-min returns sampled from the DJI30 Index. Applying Moment Matching (MM) and Maximum Likelihood Estimation (MLE) techniques, we highlight the significance of the...
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| Format: | Article |
| Language: | English |
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Taylor & Francis Group
2022-12-01
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| Series: | Cogent Economics & Finance |
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| Online Access: | https://www.tandfonline.com/doi/10.1080/23322039.2022.2095764 |
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| author | Peterson Owusu Junior Nagaratnam Jeyasreedharan Imhotep Paul Alagidede |
| author_facet | Peterson Owusu Junior Nagaratnam Jeyasreedharan Imhotep Paul Alagidede |
| author_sort | Peterson Owusu Junior |
| collection | DOAJ |
| description | In this paper, we investigate the goodness-of-fit of the flexible four-parameter generalized Lambda Distribution (GLD) for high-frequency 5-min returns sampled from the DJI30 Index. Applying Moment Matching (MM) and Maximum Likelihood Estimation (MLE) techniques, we highlight the significance of the higher-order parameters of the GLD distribution to depict the asymmetric and fat-tailed behaviour observed in high-frequency returns data. We also show and explain why the MLE consistently outperforms the MM; especially in the presence of “outliers”. Finally, we use lambda-space scatterplots to introduce, clarify and discuss additional stylized facts of high-frequency index returns not found in the extant high-frequency literature. |
| format | Article |
| id | doaj-art-4e2e3f3bfa894a7bb68d8b161db1e6b5 |
| institution | DOAJ |
| issn | 2332-2039 |
| language | English |
| publishDate | 2022-12-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Economics & Finance |
| spelling | doaj-art-4e2e3f3bfa894a7bb68d8b161db1e6b52025-08-20T03:12:41ZengTaylor & Francis GroupCogent Economics & Finance2332-20392022-12-0110110.1080/23322039.2022.2095764On the goodness-of-fits of the generalized lambda distribution on high-frequency stock index returnsPeterson Owusu Junior0Nagaratnam Jeyasreedharan1Imhotep Paul Alagidede2Department of Finance, School of Business, University of Cape Coast, Cape Coast, GhanaTasmanian School of Business & Economics, University of Tasmania, Tasmania, AustraliaWits Business School, University of the Witwatersrand, Johannesburg, South AfricaIn this paper, we investigate the goodness-of-fit of the flexible four-parameter generalized Lambda Distribution (GLD) for high-frequency 5-min returns sampled from the DJI30 Index. Applying Moment Matching (MM) and Maximum Likelihood Estimation (MLE) techniques, we highlight the significance of the higher-order parameters of the GLD distribution to depict the asymmetric and fat-tailed behaviour observed in high-frequency returns data. We also show and explain why the MLE consistently outperforms the MM; especially in the presence of “outliers”. Finally, we use lambda-space scatterplots to introduce, clarify and discuss additional stylized facts of high-frequency index returns not found in the extant high-frequency literature.https://www.tandfonline.com/doi/10.1080/23322039.2022.2095764Maximum likelihoodmoment matchinggeneralized lambda distributionhigh-frequencyGoodness-of-fithigher moments |
| spellingShingle | Peterson Owusu Junior Nagaratnam Jeyasreedharan Imhotep Paul Alagidede On the goodness-of-fits of the generalized lambda distribution on high-frequency stock index returns Cogent Economics & Finance Maximum likelihood moment matching generalized lambda distribution high-frequency Goodness-of-fit higher moments |
| title | On the goodness-of-fits of the generalized lambda distribution on high-frequency stock index returns |
| title_full | On the goodness-of-fits of the generalized lambda distribution on high-frequency stock index returns |
| title_fullStr | On the goodness-of-fits of the generalized lambda distribution on high-frequency stock index returns |
| title_full_unstemmed | On the goodness-of-fits of the generalized lambda distribution on high-frequency stock index returns |
| title_short | On the goodness-of-fits of the generalized lambda distribution on high-frequency stock index returns |
| title_sort | on the goodness of fits of the generalized lambda distribution on high frequency stock index returns |
| topic | Maximum likelihood moment matching generalized lambda distribution high-frequency Goodness-of-fit higher moments |
| url | https://www.tandfonline.com/doi/10.1080/23322039.2022.2095764 |
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