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The Distribution of Futures Prices: A Test of the Stable Paretian and Mixture of Normals Hypotheses

Joyce A. Hall, Wade Brorsen and Scott H. Irwin
The Journal of Financial and Quantitative Analysis
Vol. 24, No. 1 (Mar., 1989), pp. 105-116
DOI: 10.2307/2330751
Stable URL: http://www.jstor.org/stable/2330751
Page Count: 12
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
The Distribution of Futures Prices: A Test of the Stable Paretian and Mixture of Normals Hypotheses
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Abstract

Two alternate hypotheses, the stable Paretian and mixture of normals, have been proposed to explain the observed thick-tailed distributions of futures price movements. The two hypotheses are tested by applying the stability-under-addition test of stable distribution parameters to twenty lengthy time series of changes in daily closing futures prices. Tests are conducted on both the original data series and randomized data. The results offer support for the mixture of normals hypothesis.

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