The art of fitting financial time series with Levy stable distributions

Details The art of fitting financial time series with Levy stable distributions The art of fitting financial time series with Levy stable distributions

2006-08-23

arxiv.org/abs/physics/0608224v1

Physics

Data Analysis, Statistics and Probability

17 pages, 10 figures, 2 tables. Paper presented at the DDAP4 conference, Pohang, Korea, July 2006. Submitted to Journal of Kor

Scientific paper

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.

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