Hongtao Guo1, Zhijie Xiao2

(1. Salem State University, USA; 2. Boston College, USA)

 

 

Abstract: Cumulative empirical evidence show that distributional information has very important impact on investor’s decision making, since the distributional information of asset returns that represents risk and opportunity. In addition, empirical evidence in finance has documented that stock return distributions are not normal. In this paper, we argue that in addition to the left tail information, the right tail distributional information of returns can provide very valuable information to investors and portfolio managers, and the right tail information should be used together with other (say, left tail) information in analyzing financial markets. We consider measures of the right tail distribution. Quantile regression estimators for the right tail measures are developed. The proposed estimation method may also be applied to estimation of other measures in finance.

 

 

Key words: distributional information; right and left tail measurement; financial variables

 

JEL codes: C48, G1