MODELING THE DISTRIBUTIONS OF THE IBOVESPA AND S&P500 RATES OF RETURN

Authors

  • Francisco Henrique Figueiredo de Castro Fundação Escola de Comércio Álvares Penteado
  • Héber Pessoa da Silveira Fundação Escola de Comércio Álvares Penteado

Abstract

Stock market indices' rate of return distributions is a recurrent theme in financial literature, especially because some models require the normality assumption as premise. Following the works of Ingersoll Jr. (1987) and Hamada & Valdez (2004), the empirical distribution of the Ibovespa and S&P500 rates of returns from 1986 to 2006 was analyzed. As reported by some others authors, for both indices, the results evidenced that the normality assumption can be highly questionable, because other theoretical distributions from the elliptical family fitted the data better. The rates of return for the Brazilian and American indices  showed leptokurtosis, and, in the Brazilian case, asymmetric shape, so that only distributions that deal with these parameters in a less restrictive way, as the Logistic or Log-logistic distributions, can show a better fit to the observed data.

KEYWORDS Normality; Rate of return; Elliptical distributions; CAPM; Maximum likelihood.

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Author Biographies

Francisco Henrique Figueiredo de Castro, Fundação Escola de Comércio Álvares Penteado

Doutor em Administração pela Universidade de São Paulo (USP). Professor pesquisador do Programa de Mestrado em Ciências Contábeis do Centro Universitário FECAP.

Héber Pessoa da Silveira, Fundação Escola de Comércio Álvares Penteado

Doutor em Administração pela Universidade de São Paulo (USP). Professor colaborador do Programa de Mestrado em Ciências Contábeis do Centro Universitário FECAP

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Published

2009-04-03

Issue

Vol. 10 No. 1 (2009)

Section

Presentation

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