Authors
Richard M Bookstaber, James B McDonald
Publication date
1987/7/1
Journal
Journal of business
Pages
401-424
Publisher
University of Chicago Press
Description
This paper introduces a generalized distribution, called the GB2 distribution, for describing security returns. The distribution is extremely flexible, containing a large number of well-known distributions, such as the lognormal, log-t, and log-Cauchy distributions, as special or limiting cases and allowing large, even infinite higher moments. This flexibility allows a direct representation of different degrees of fat tails in the distribution. The properties of the GB2 make it useful in empirical estimation of security returns and in facilitating the development of option pricing models and other models that depend on the specification and mathematical manipulation of distributions.
Total citations
Scholar articles
RM Bookstaber, JB McDonald - Journal of business, 1987