The Test of non-normal Distribution of Stock Returns with Monte Carlo Simulation and The Explanation
Zhiguang Cao · Cai-jing yanjiu · 2005
The distribution of financial data is usuallyfat-tailed and asymmetric,so it is not proper to fit the real financial data by normal distribution.This paper fits the returns of Shanghai Composite using generalized hyperblic distribution and tests its goodness-of-fit.The results of test show that the daily log-return of Shanghai Composite can be well described by generalized hyperbolic distribution and normal inverse Gaussian distribution.The fact of non-normal distribution can be well explained by a simple linear system with noise.