Footnote:
In: Computational Statistic and Data Analysis, Forthcoming
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments September 18, 2011 erstellt
Description:
This paper deals with the estimation of continuous-time diffusion processes which model the dynamics of a well diversified world stock index (WSI). We use nonparametric kernel-based estimation to empirically identify a square root type diffusion coefficient function in the dynamics of the discounted WSI. A square root process turns out to be an excellent building block for a parsimonious model for the WSI. Its dynamics allow capturing various empirical stylized facts and long term properties of the index, as well as, the explicit computation of various financial quantities