Forecasting heavy-tailed densities with positive Edgeworth and Gram-Charlier expansions

Níguez, Trino Manuel and Perote, Javier (2012) Forecasting heavy-tailed densities with positive Edgeworth and Gram-Charlier expansions. Oxford Bulletin of Economics and Statistics, 74 (4). pp. 600-627. ISSN 0305-9049

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Official URL: http://dx.doi.org/10.1111/j.1468-0084.2011.00663.x

Abstract

This article presents a new semi-nonparametric (SNP) density function, named Positive Edgeworth-Sargan (PES). We show that this distribution belongs to the family of (positive) Gram-Charlier (GC) densities and thus it preserves all the good properties of this type of SNP distributions but with a much simpler structure. The in- and out-of-sample performance of the PES is compared with symmetric and skewed GC distributions and other widely used densities in economics and finance. The results confirm the PES as a good alternative to approximate financial returns distribution, specially when skewness is not severe.

Item Type: Article
Subjects: University of Westminster > Westminster Business School
Depositing User: Rachel Wheelhouse
Date Deposited: 05 Nov 2012 14:34
Last Modified: 28 May 2013 13:21
URI: http://westminsterresearch.wmin.ac.uk/id/eprint/11476

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