Study On The Expected Returns Of Stock Market

Financial asset return is a very important concept in the capital market. The distributionof yield is an important issue in economics and finance. It is essential especially in the choiceof a portfolio, risk management and option pricing, etc. Scholars have made many theoreticaland empirical researches of the the normal distribution assumption of yields. The results showthat a large majority of financial asset returns on financial markets do not obey the normaldistribution. But there are many forms of non-normal distribution, which kind of non-normaldistribution can describe the financial asset returns best has not reached the same conclusion.The paper choose average data of Shanghai Composite Index innovatively andpractically,and using it to verify the the non-normal distribution, then according to thedifferent parameter limit to classify and fit the non-normal distribution.Selecting the mostsuitable empirical distribution for our China’s stock market returns.This paper mainly divided into the following sections: The introduction part mainlyoutlines the background and significance of this article; The second part is the analysis andintroduction of the calculation method of yield; The third part is the description and influenceof data selection on return series; The fourth part is verification of non-normal distributionwith weekly return,monthly return, MA5return and MA30return. The results show thatchinese stock market return series are obviously non-normal. The fifth part shows theparameter estimation of weekly return, monthly return, MA5return and MA30return for fivetypes of distribution family, with the maximum likelihood estimation method.Finally it turnsout that Exponential Generalized Beta Distribution is most suitable for the description ofchinese stock market returns.The last part gives the conclusion of the paper.