Infinite-Variance Error Structure in Finance and Economics

Artikel

Many macroeconomic and financial data exhibit large outliers and high volatility so that their returns are usually modeled to follow an infinite-variance stable process. Extreme behaviors in such data tend to exist especially for emerging markets due to frequent existence of high economic turmoil. A relatively new area of research studies that model the financial returns as infinite-variance stable errors exists for emerging markets as well as for industrialized countries. This study aims to briefly introduce the reader the concept of infinite-variance stable distributions, discuss some existing studies on unit root and cointegration tests that assume infinite-variance stable error structure, and then to point out the potential lines of research while showing the significance of this relatively new concept.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: International Econometric Review (IER) ; ISSN: 1308-8815 ; Volume: 10 ; Year: 2018 ; Issue: 1 ; Pages: 14-23 ; Ankara: Econometric Research Association (ERA)

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
• Subject: Infinite-Variance Errors ; Stable Distributions ; Financial Returns ; Unit Root Tests ; Co-Integration Tests

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Serttas, Fatma Ozgu
• Event: Veröffentlichung
• (who): Econometric Research Association (ERA)
• (where): Ankara
• (when): 2018

Further information

• DOI: doi:10.33818/ier.306676
• Handle: http://hdl.handle.net/10419/238828
• Last update: 10.03.2025, 11:45 AM CET