Empirical Study of Tail Distributions of Multi-Day Index Returns

Abstract

We study the tail distributions of multi-day index returns across a variety of asset classes. Fitting power laws to the tail distributions, we find tail indices in the range [2-4] for all underlyings, for returns up to 250 days. We also find that the power laws can not be statistically ruled out in favor of an exponentially decaying tail distribution. Consequences for risk management are briefly discussed.