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Article: The confounding effects of distribution mixtures on some basic methods for handling stable-Paretian distributions

TitleThe confounding effects of distribution mixtures on some basic methods for handling stable-Paretian distributions
Authors
KeywordsFinance
Mixture Of Distributions
Stable-Paretian Distribution
Issue Date1997
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ejor
Citation
European Journal Of Operational Research, 1997, v. 100 n. 1, p. 60-71 How to Cite?
AbstractThe belief that the distributions of many business and economic variables are stable-Paretian (SP) generated a large literature on SP financial modelling. In contrast, some recent studies appear to have shown that the major financial variables thought to be SP are not SP. However, practically all these earlier studies assume that the variable under consideration has a single or 'pure' SP distribution, whereas many business/economic variables come from distribution mixtures. This paper investigates the applicability of some basic SP methods to mixtures of SP distributions. Our results show that current SP parameter-estimation procedures and SP-hypothesis tests are all very unreliable for SP mixtures. Our results imply that: (i) earlier findings on testing the SP hypothesis for various business/economic variables are unreliable, and whether major financial variables are SP remains an important unanswered question; (ii) new methods need to be developed to handle SP mixtures. © 1997 Elsevier Science B.V.
Persistent Identifierhttp://hdl.handle.net/10722/177859
ISSN
2015 Impact Factor: 2.679
2015 SCImago Journal Rankings: 2.595
References

 

DC FieldValueLanguage
dc.contributor.authorLau, HSen_US
dc.contributor.authorLau, AHLen_US
dc.date.accessioned2012-12-19T09:40:36Z-
dc.date.available2012-12-19T09:40:36Z-
dc.date.issued1997en_US
dc.identifier.citationEuropean Journal Of Operational Research, 1997, v. 100 n. 1, p. 60-71en_US
dc.identifier.issn0377-2217en_US
dc.identifier.urihttp://hdl.handle.net/10722/177859-
dc.description.abstractThe belief that the distributions of many business and economic variables are stable-Paretian (SP) generated a large literature on SP financial modelling. In contrast, some recent studies appear to have shown that the major financial variables thought to be SP are not SP. However, practically all these earlier studies assume that the variable under consideration has a single or 'pure' SP distribution, whereas many business/economic variables come from distribution mixtures. This paper investigates the applicability of some basic SP methods to mixtures of SP distributions. Our results show that current SP parameter-estimation procedures and SP-hypothesis tests are all very unreliable for SP mixtures. Our results imply that: (i) earlier findings on testing the SP hypothesis for various business/economic variables are unreliable, and whether major financial variables are SP remains an important unanswered question; (ii) new methods need to be developed to handle SP mixtures. © 1997 Elsevier Science B.V.en_US
dc.languageengen_US
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ejoren_US
dc.relation.ispartofEuropean Journal of Operational Researchen_US
dc.subjectFinanceen_US
dc.subjectMixture Of Distributionsen_US
dc.subjectStable-Paretian Distributionen_US
dc.titleThe confounding effects of distribution mixtures on some basic methods for handling stable-Paretian distributionsen_US
dc.typeArticleen_US
dc.identifier.emailLau, AHL: ahlau@business.hku.hken_US
dc.identifier.authorityLau, AHL=rp01072en_US
dc.description.naturelink_to_subscribed_fulltexten_US
dc.identifier.doi10.1016/S0377-2217(95)00330-4-
dc.identifier.scopuseid_2-s2.0-0031193087en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-0031193087&selection=ref&src=s&origin=recordpageen_US
dc.identifier.volume100en_US
dc.identifier.issue1en_US
dc.identifier.spage60en_US
dc.identifier.epage71en_US
dc.publisher.placeNetherlandsen_US
dc.identifier.scopusauthoridLau, HS=7201497264en_US
dc.identifier.scopusauthoridLau, AHL=7202626080en_US

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