LOMAX-PEARSON VII DISTRIBUTION WITH APPLICATION TO FINANCIAL STOCK RETURNS

In this paper, a new subclass of elliptically contoured distributions (ECD) is introduced.It is constructed as a scale mixture of Lomax distribution and Pearson type VII distribution. Mathematical properties of the Lomax-Pearson 7 (LP7) distribution, such as stochastic representation, characteristic function, are derived in closed forms. Further, the importance of this new distribution is illustrated through an empirical study on financial returns of Muscat stock exchange of index 30 (MSX30).The obtained results revealed that LP7 distribution provided a better fit of the empirical distribution of the data than Normal distribution, Logistic distribution, and Pearson VII distribution. Competing distributions were evaluated and ranked under Akaike information criterion.