RT Journal Article
SR Electronic
T1 Asset Return Distributions and the Investment Horizon
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 47
OP 62
DO 10.3905/jpm.2004.412319
VO 30
IS 3
A1 Haim Levy
A1 Ran Duchin
YR 2004
UL https://pm-research.com/content/30/3/47.abstract
AB The optimal investment decision rule and asset equilibrium prices depend on the assumed distribution of rates of return. And empirical distributions vary with the assumed time interval (investment horizon). The authors test the goodness of fit of 11 theoretical distributions including the normal distribution, fat-tailed distributions, and skewed distributions for investment horizons ranging from one day to four years. The normal distribution performs poorly, and never provides the best fit for any time interval. In the 330 goodness of fit tests reported, at least one distribution of the 11 always fits the data better than the normal distribution. As the logistic distribution fits the data best for investment horizons of up to one year, analysis focuses on this distribution and its implications for equilibrium asset prices.