TITLE:
Distribution Analysis of S&P 500 Financial Turbulence
AUTHORS:
Hugo Gobato Souto
KEYWORDS:
Financial Turbulence, Generalised Hyperbolic Distribution, S&P 500, Goodness-of-Fit Tests
JOURNAL NAME:
Journal of Mathematical Finance,
Vol.13 No.1,
February
21,
2023
ABSTRACT: In 2010 a new financial risk measure was discovered, namely Financial Turbulence. Although it has been studied by other papers, its statistical distribution study is still missing. Knowing a financial phenomenon distribution is of importance when performing risk and portfolio management, especially when estimating parametric Value-at-Risk with Copulas and performing Monte Carlo simulations. Therefore, this paper explores the S&P 500 Fi-nancial Turbulence to determine its best distribution fit by making use of various residual measures and goodness-of-fit tests. Additionally, it makes use of in-sampling and out-sampling in the period between 01/11/2012 and 01/11/2022. The results of this research indicate that the Generalised Hyperbolic distribution describes the S&P 500 Financial Turbulence the best.