() and Niklas Nordman
Kurt Brännäs: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Niklas Nordman: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Abstract: The paper studies two approaches to modelling conditional skewness in a nonlinear model for stock returns. It is found that a normal distribution can be rejected. A log-generalized gamma distribution with one time-varying density parameter, and in particular a Pearson IV specification with three constant parameters are better supported by data. While the log-generalized gamma indicates that time-varying skewness is an important feature of the daily composite returns of NYSE, the Pearson IV model suggests that excess kurtosis rather than skewness should be accounted for.
18 pages, June 1, 2001
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