The Distribution of Stock Market Returns: 1958-1973
- 1 April 1978
- journal article
- Published by SAGE Publications in Australian Journal of Management
- Vol. 3 (1) , 79-90
- https://doi.org/10.1177/031289627800300106
Abstract
The empirical frequency distributions of continuously-compounded monthly share returns on the Melbourne Stock Exchange over 1958-73 are studied for individual securities and portfolios. The typical distributional shape is observed and the stable Paretian and Student t distributions are fitted to the returns. The latter clearly is superior and even normality is a reasonable approximation for medium sized portfolios. The most likely explanation seems to be non-stationarity in the generating process for returns, rather than infinite-variance distributions or data errors. The implications for future empirical work and the theory of asset pricing are discussed.Keywords
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