Testing densities with financial data: an empirical comparison of the EdgeworthSargan density to the Students t

The Edgeworth—Sargan density has been shown capable of capturing salient empirical regularities of financial data in some studies. The main purpose of the reported study is to compare its performance with other densities, most notably to the Student t. Both densities can account for thick tails, and asymmetry One important by product of the comparison is to test the existence of moments. The comparison of densities is carried out with daily financial observations, spanning 25 years of data from two major world stock markets. Attention is paid to the fitting of other empirical regularities, and especially to the peak, frequently found at the middle of the densities.