Maximum Likelihood Estimates of Regression Coefficients with α-stable residuals and Day of Week effects in Total Returns on Equity Indices
نویسنده
چکیده
This Paper summarizes the theory of Maximum Likelihood Estimation of regressions with α-stable residuals. Day of week effects in returns on equity indices, adjusted for dividends (total returns) are estimated and tested using this and traditional OLS methodology. I find that the α-stable methodology is feasible. There are some differences in the results from the two methodologies. The conclusion remains that if individual coefficients are of interest and the residuals have fat tails and a possible α-stable distribution, the results should be checked for robustness using methods such as those employed here.
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