Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/258176 
Year of Publication: 
2021
Citation: 
[Journal:] Risks [ISSN:] 2227-9091 [Volume:] 9 [Issue:] 5 [Article No.:] 88 [Publisher:] MDPI [Place:] Basel [Year:] 2021 [Pages:] 1-35
Publisher: 
MDPI, Basel
Abstract: 
The aim of this work was to test how returns are distributed across multiple asset classes, markets and sampling frequency. We examine returns of swaps, equity and bond indices as well as the rescaling by their volatilities over different horizons (since inception to Q2-2020). Contrarily to some literature, we find that the realized distributions of logarithmic returns, scaled or not by the standard deviations, are skewed and that they may be better fitted by t-skew distributions. Our finding holds true across asset classes, maturity and developed and developing markets. This may explain why models based on dynamic conditional score (DCS) have superior performance when the underlying distribution belongs to the t-skew family. Finally, we show how sampling and distribution of returns are strictly connected. This is of great importance as, for example, extrapolating yearly scenarios from daily performances may prove not to be correct.
Subjects: 
return distributions
t-skew
market volatility
correlation
equitymarkets
bondmarkets
FX
JEL: 
G10
C10
C20
C16
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
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