What question did this study set out to answer?

To develop a composite distribution that better models asymmetric and heavy-tailed financial returns.

December 8, 2025EconometricsOpen Access

Construction and Applications of a Composite Model Based on Skew-Normal and Skew-t Distributions

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Novel composite distribution demonstrates improved tail risk capture in financial models, highlighting implications for risk management.

To develop a composite distribution that better models asymmetric and heavy-tailed financial returns.
Introduced a novel composite distribution with skew-normal and skew-t tails
Conducted Monte Carlo simulations for model evaluation
Performed empirical backtesting using TSLA daily log returns and risk measures
Achieved superior fit with lower-tail KS statistics
Demonstrated accurate tail risk capture with improved log-likelihood
Provided stable parameter estimation compared to benchmarks

Jingjie Yuan (2025) studied this question.

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