West Texas Intermediate (WTI) Crude Oil price started plummeting from a high of US$107.95 in June 20, 2014 to a low of US$31.42 in Jan 11, 2016. This prompted writing this post in which I explore the correlation between the prices of crude oil and GCC Banks and Financial Services.banks companies correlation coupled crude crude oil financial financial services GCC gcc banks jan 11 june 20 oil post services
I established in my previous posts that the normality assumption for the log returns of TASI index and its sectors is false. In this post, I’ll use the Normal probability plot to investigate the distributions of the data.convexity data density left log returns normal normality shows studying tasi index unimodal
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.closely comparison density insurance kde normal resembles reveals tasi
Mainly, I attempt to answer the question, “Is it valid to assume that Tadawul shows characteristics of normality in its returns?” The short answer is a resounding NO.
Normality assumption is a choice made by financial analysts and risk managers to simplify their understanding of the financial markets.continue excess financial kurtosis markets post rarely reading skewness