The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
AFA members can log in to view full-text articles below.
View past issues
Search the Journal of Finance:
Search results: 3.
Models of Stock Returns—A Comparison
Published: 03/01/1984 | DOI: 10.1111/j.1540-6261.1984.tb03865.x
STANLEY J. KON
In this paper a discrete mixture of normal distributions is proposed to explain the observed significant kurtosis (fat tails) and significant positive skewness in the distribution of daily rates of returns for a sample of common stocks and indexes. Stationarity tests on the parameter estimates of this discrete mixture of normal distributions model revealed significant differences in the mean estimates that can explain the observed skewness and significant differences in the variance estimates that can explain the observed kurtosis. An alternative explanation for the observed fat tails is the symmetric student model. The result of a comparison between the models is that the discrete mixture of normal distributions model has substantially more descriptive validity than the student model.