The art of fitting financial time series with Levy stable distributions
Enrico Scalas, Kyungsik Kim
Abstract
This paper illustrates a procedure for fitting financial data with α-stable distributions. After using all the available methods to evaluate the distribution parameters, one can qualitatively select the best estimate and run some goodness-of-fit tests on this estimate, in order to quantitatively assess its quality. It turns out that, for the two investigated data sets (MIB30 and DJIA from 2000 to present), an α-stable fit of log-returns is reasonably good.
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