The structural Sharpe model under t-distributions |
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Authors: | Manuel Galea David Cademartori Filidor Vilca |
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Institution: | 1. Universidad de Valparaíso and Laboratorio de Análisis Estocástico , Chile;2. Escuela de Comercio, Pontificia Universidad Católica de Valparaíso , Chile;3. Departamento de Estatística , Universidade Estadual de Campinas , Brazil |
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Abstract: | In this paper we consider Sharpe's single-index model or Sharpe's model, by assuming that the returns obtained follow a multivariate t elliptical distribution. Also, given that the returns of the market are not observable, the statistical analysis was made in the context of an errors-in-variables model. In order to analyze the sensibility to possible outliers and/or atypical returns of the maximum likelihood estimators the local influence method 10 Cook, R. D. 1986. Assessment of local influence. J. Roy. Statist. Soc. B, 48: 133–169. Google Scholar]] was implemented. The results are illustrated by using a set of shares of companies belonging to the Chilean Stock Market. The main conclusion is that the t model with small degrees of freedom is able to incorporate possible outliers and influential returns in the data. |
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Keywords: | diagnostics t-distribution errors-in-variables models portfolios Sharpe model |
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