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Analysis of extreme events [47]

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Bullet points include: Time-varying nature of the world in which we live Market / sector / instrument volatility (and maybe other distributional characteristics) change through time Heteroscedasticity, GARCH, regime switching Returns may be (conditionally) Normal over short time periods, but data series still  (unconditionally) non-Normal when viewed over longer time periods Selection effects, e.g. manager behaviour may (consciously or unconsciously) bias towards fat-tailed behaviour, see Kemp (2010) Crowded trades and leverage As well as intrinsically skewed behaviour such as for individual bonds

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