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Skew Densities and Ensemble Inference for Financial Economics

H. D. Vinod
Journal / Anthology

The Mathematica Journal
Year: 2005
Volume: 9
Issue: 4
Page range: 852-862

Financial economics includes the study of the density of 'excess returns,' having skewness, fat tails, and excess kurtosis. We illustrate it using monthly data on a mutual fund. The nonnormality of impacts measurement of potential losses by 'value at risk' (VaR). Since finance literature has mostly ignored Azzalini's [1] skew normal (SN) density, our aim is to illustrate its implementation using Mathematica and mathStatica [2]. We use a location-scale version of the SN distribution, create its likelihood function, and use maximum likelihood (ML) to estimate its parameters. We illustrate it with data for a mutual fund and report the ML estimates, quantiles of , and the VaR.

*Business and Economics
*Mathematics > Probability and Statistics
*Wolfram Technology > Application Packages > Additional Applications > mathStatica