Many of the concepts in theoretical and empirical finance developed over the past decades – including the classical portfolio theory, the Black-Scholes-Merton option pricing model or the RiskMetrics variance-covariance approach to VaR – rest upon the assumption that asset returns follow a...

A new model class for univariate asset returns is proposed which involves the use of mixtures of stable Paretian distributions, and readily lends itself to use in a multivariate context for portfolio selection. The model nests numerous ones currently in use, and is shown to outperform all its...

This paper deals with estimating peaked densities over the interval [0,1] using the Uneven Two-Sided Power Distribution (UTP). This distribution is the most complex of all the bounded power distributions introduced by Kotz and van Dorp (2004). The UTP maximum likelihood estimator, a result not...

The inquiries to return predictability are traditionally limited to the first two moments, mean and volatility. Analogously, literature on portfolio selection also stems from a moment-based analysis with up to the fourth moment being considered. This paper develops a distribution-based framework...

This paper proposes a GARCH-jump mixed model for individual stock returns that takes into account four types of risks: the systematic and idiosyncratic jumps and the systematic and idiosyncratic diffusive volatility. By considering a general pricing kernel with all underlying risk factors, we...

This paper develops a dynamic portfolio selection model incorporating economic uncertainty for business cycles. It is assumed that the financial market at each point in time is defined by a hidden Markov model, which is characterized by the overall equity market returns and volatility. The risk...

This paper contributes to characterizing the probability density of the price returns in some European day-ahead electricity markets (NordPool, APX, Powernext) by fitting some flexible and general families of distributions, such as the α-stable, Normal Inverse Gaussian (NIG), Exponential Power...

The aim of this paper is to compare statistical properties of stock price indices in periods of booms with those in periods of stagnations. We use the daily data of the four stock price indices in the major stock markets in the world: (i) the Nikkei 225 index (Nikkei 225) from January 4, 1975 to...

We propose a new model for dynamic volatilities and correlations of skewed and heavy-tailed data. Our model endows the Generalized Hyperbolic distribution with time-varying parameters driven by the score of the observation density function. The key novelty in our approach is the fact that the...

Sharpe ratio has been widely used in the portfolio management industry as well as fund industry (Robertson, 2001; Scholz and Wilkens, 2005). Users often forget the main core assumption describing the appropriateness of such risk-adjusted performance measure, namely asset return normality. This...