The importance of skewness and kurtosis in the return generating process is assessed by examining the out-of-sample forecasting power of three different Exponential GARCH models that assume the conditional errors are generated by a normal distribution, a generalized error distribution, and a nonparametric distribution. These models are selected because they incorporate the time-series properties of security returns and each of these distributions allows for various degrees of conditional skewness and kurtosis. / First, daily security returns of firms listed on the New York and American Stock Exchanges over the period 1971 to 1991, excluding the year of 1987, are used to estimate the three models. This study finds that the importance of skewness and kurtosis varies over time and across firm size. The length of the holding period also affects the accuracy and reliability of expected returns generated by the three Exponential GARCH models. / Second, daily security returns, computed from both traded prices and bid-ask averages, of National Market System firms in the OTC market from 1988 to 1991, are used to estimate the three models. This study finds that there is a tradeoff between obtaining lower forecast errors and the volatility of the forecast errors when skewness and kurtosis are incorporated in the return generating process. Overall, forecast errors are lower and less volatile when bid-ask averages are used to compute security returns. However, the bid-ask "bounce" does not have a significant affect on the importance of skewness and kurtosis in the return generating process. / Source: Dissertation Abstracts International, Volume: 54-10, Section: A, page: 3835. / Major Professor: David R. Peterson. / Thesis (Ph.D.)--The Florida State University, 1993.
| Identifer | oai:union.ndltd.org:fsu.edu/oai:fsu.digital.flvc.org:fsu_77021 |
| Contributors | St. Pierre, Eileen Foley., Florida State University |
| Source Sets | Florida State University |
| Language | English |
| Detected Language | English |
| Type | Text |
| Format | 241 p. |
| Rights | On campus use only. |
| Relation | Dissertation Abstracts International |
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