Template-Type: ReDIF-Article 1.0
Author-Name:  Fatma Ozgu Serttas
Author-Email: foserttas@ybu.edu.tr
Author-Workplace-Name: Assistant Professor of Economics, Ankara Yıldırım Beyazıt University, Ankara, Turkey.
Title: Infinite-Variance Error Structure in Finance and Economics
Abstract: Many macroeconomic and financial data exhibit large outliers and high volatility so that their returns are usually modeled to follow an infinite-variance stable process. Extreme
behaviors in such data tend to exist especially for emerging markets due to frequent existence of high economic turmoil. A relatively new area of research studies that model
the financial returns as infinite-variance stable errors exists for emerging markets as well as for industrialized countries. This study aims to briefly introduce the reader the concept
of infinite-variance stable distributions, discuss some existing studies on unit root and cointegration tests that assume infinite-variance stable error structure, and then to point out
the potential lines of research while showing the significance of this relatively new concept.
Classification-JEL: C21, C22, C32.
Keywords: Infinite-Variance Errors, Stable Distributions, Financial Returns, Unit Root Tests, Co-Integration Tests.
Journal: International Econometric Review
Pages: 14-23
Volume: 10
Issue: 1
Year: 2018
Month: April
File-URL: http://www.era.org.tr/makaleler/306676.pdf
File-Format: Application/pdf
Handle: RePEc:erh:journl:v:10:y:2018:i:1:p:14-23