Financial market data
3.1 Stylized facts on financial market returns
3.1.1 Stylized facts for univariate series
Before we turn to the topic of modelling financial market risks, it is worthwhile to consider and review typical characteristics of financial market data. These are summarized in the literature as ‘stylized facts’ (see Campbell et al. 1997; McNeil et al. 2005). These observed properties have important implications for assessing whether the risk model chosen is appropriate or not. Put differently, a risk model that does not capture the time series characteristics of financial market data adequately will also not be useful for deriving risk measures. For observed financial market data, the following stylized facts can be stated:
As an example, we will now check whether these ...