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https://hdl.handle.net/20.500.14279/23123
Title: | Stock returns are not always from the same distribution: Evidence from the Great Recession | Authors: | Michail, Nektarios A. Magidou, Marina |
Major Field of Science: | Social Sciences | Field Category: | Economics and Business | Keywords: | Distribution;Kolmogorov-Smirnov;Cramér-von Mises;Wilcoxon rank-sum;Returns;Portfolio allocation | Issue Date: | 21-Sep-2020 | Source: | Investment Management and Financial Innovations, vol. 17, no. 3, pp. 189 - 204 | Volume: | 17 | Issue: | 3 | Start page: | 189 | End page: | 204 | Journal: | Investment Management and Financial Innovations | Abstract: | Portfolio allocation strategies, and notably the mean-variance approach, use past returns to assign optimal weights. Even though both past and expected returns should come from the same distribution, a formal test of whether this holds in practice has not been conducted yet. Thus, the study examines if the daily returns of 242 companies with continuous trading in the S&P index come from the same distribution using the Kolmogorov-Smirnov, Cramer-Von Mises, and Wilcoxon rank-sum tests. The tests suggest that generally stock returns do come from the same distribution. However, the hypothesis is rejected during the Great Recession, with the rejection rate increasing as the forecast horizon increased. The rejection rate, using an array of macroeconomic variables, is found to record high levels of persistence. Although macroeconomic variables were not found to be statistically significant determinants of the rejection rate, market distress has a small but significant effect. | URI: | https://hdl.handle.net/20.500.14279/23123 | ISSN: | 18129358 | DOI: | 10.21511/imfi.17(3).2020.15 | Rights: | © Nektarios A. Michail, Marina Magidou. This work is licensed under a Creative Commons Attribution 4.0 International License. Attribution-NonCommercial-NoDerivatives 4.0 International |
Type: | Article | Affiliation : | Cyprus University of Technology | Publication Type: | Peer Reviewed |
Appears in Collections: | Άρθρα/Articles |
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IMFI_2020_03_Michail.pdf | Fulltext | 676.92 kB | Adobe PDF | View/Open |
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