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Fat tails in financial return distributions revisited: evidence from the Korean stock market

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posted on 2023-06-09, 17:33 authored by Cheoljun 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

ISSN

0378-4371

Publisher

Elsevier

Volume

526

Page range

121055

Department affiliated with

  • Mathematics Publications

Research groups affiliated with

  • Probability and Statistics Research Group Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2019-04-10

First Open Access (FOA) Date

2020-04-11

First Compliant Deposit (FCD) Date

2019-04-10

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