A Mixture-of-Normal Distribution Modeling Approach in Financial Econometrics: A Selected Review

Posted: 2 Apr 2013

See all articles by Tony S. Wirjanto

Tony S. Wirjanto

University of Waterloo - School of Accounting and Finance; University of Waterloo, Department of Statistics & Actuarial Science

Dinghai Xu

Independent

Date Written: March 1, 2013

Abstract

This paper provides a selected review of the recent developments and applications of mixture-of-normal (MN) distribution models in financial econometrics. One noted feature of the MN model is its flexibility in accommodating various shapes of continuous distributions, and its ability in capturing leptokurtic, skewed and multimodal characteristics of financial time-series data. The survey is conducted under two broad themes: (i) estimation methods and (ii) applications to financial econometrics.

Keywords: Mixtures of Normal, Maximum Likelihood, Moment Generating Function, Characteristic Function, Switching Regression Model, (G)ARCH Model, Stochastic Volatility Model, Autoregressive Conditional Duration Model, Stochastic Duration Model, Value at Risk

JEL Classification: C22, C53, G19

Suggested Citation

Wirjanto, Tony S. and Xu, Dinghai, A Mixture-of-Normal Distribution Modeling Approach in Financial Econometrics: A Selected Review (March 1, 2013). Available at SSRN: https://ssrn.com/abstract=2242925

Tony S. Wirjanto (Contact Author)

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1
Canada
519-888-4567 x35210 (Phone)

HOME PAGE: http://https://uwaterloo.ca/statistics-and-actuarial-science/people-profiles/tony-wirjanto

University of Waterloo, Department of Statistics & Actuarial Science ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1
Canada
519-888-4567 x35210 (Phone)
519-746-1875 (Fax)

HOME PAGE: http://math.uwaterloo.ca/statistics-and-actuarial-science/people-profiles/tony-wirjanto

Dinghai Xu

Independent ( email )

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
571
PlumX Metrics