posted on 2023-06-09, 17:33authored byCheoljun Eom, Taisei Kaizoji, Enrico Scalas
This study empirically re-examines fat tails in stock return distributions by applying statistical methods to an extensive dataset taken from the Korean stock market. The tails of the return distributions are shown to be much fatter in recent periods than in past periods and much fatter for small-capitalization stocks than for large-capitalization stocks. After controlling for the 1997 Korean foreign currency crisis and using the GARCH filter models to control for volatility clustering in the returns, the fat tails in the distribution of residuals are found to persist. We show that market crashes and volatility clustering may not sufficiently account for the existence of fat tails in return distributions. These findings are robust regardless of period or type of stock group.
Funding
KAKENHI; JSPS; 17K01270
JSPS; S18099
History
Publication status
Published
File Version
Accepted version
Journal
Physica A Statistical Mechanics and its Applications