TASI Sectors Density Estimation

As in the previous post; i.e. Why Normality Assumption, I estimate the density of all TASI sectors’ log returns using the histogram and the kernel density estimation (KDE) then compare with the normal density.The figures below are from the period starting from 7-Jan-2007 to 31-Dec-2015.

Notice that the highest density of returns is in the middle of each plot causing the high kurtosis. Also, comparison between the KDE and normal density in each plot reveals that TASI Insurance sector’s density closely resembles a normal curve. In fact, TASI Insurance sectors has the lowest (excess) kurtosis among other sectors in TASI; i.e. 4.082.



Author: Thamir K. AlHashemi

Practitioner in the fields of quantitative finance and risk management. A lifetime learner. Reading is the only hobby that I haven't failed in ;)

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