An empirical examination of the return distribution characteristics of agency mortgage pass-through securities

• Autores: Frank Fabozzi, Borjana Racheva-Iotova, S.V. Stoyanov
• Localización: Applied financial economics, ISSN 0960-3107, Vol. 16, Nº. 15, 2006, págs. 1085-1094
• Idioma: inglés
• DOI: 10.1080/09603100500438775
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• Resumen

  • The study investigates whether the stable Paretian hypothesis is more adequate to explain the returns of US agency mortgage pass-through securities than the traditional normal distribution assumption. The daily returns of six representative index generics of Lehman Brothers are investigated in the framework of three different probabilistic models: independent, identically distributed model, the EWMA model, and the ARMA-GARCH model. It is found that the stable Paretian hypothesis better explains not only the tails but the central part of the distribution as well.