Volume 88, Number 3, November 2009
|Number of page(s)||5|
|Published online||16 November 2009|
Non-extensitivity vs. informative moments for financial models —A unifying framework and empirical results
School of Business and Economics, University of Erlangen-Nürnberg Lange Gasse 20, 90403 Nürnberg, Germany, EU
Corresponding author: email@example.com
Accepted: 20 October 2009
Information-theoretic approaches still play a minor role in financial market analysis. Nonetheless, there have been two very similar approaches evolving during the last years, one in the so-called econophysics and the other in econometrics. Both generalize the notion of GARCH processes in an information-theoretic sense and are able to capture kurtosis better than traditional models. In this article we present both approaches in a more general framework. The latter allows the derivation of a wide range of new models. We choose a third model using an entropy measure suggested by Kapur. In an application to financial market data, we find that all considered models – with similar flexibility in terms of skewness and kurtosis – lead to very similar results.
PACS: 05.45.Tp – Time series analysis / 05.90.+m – Other topics in statistical physics, thermodynamics, and nonlinear dynamical systems / 89.65.Gh – Economics; econophysics, financial markets, business and management
© EPLA, 2009
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