Modelling stock returns: Mixture distributions (Excel)

It is common that neither of the simple distribution functions fit real world data well enough. In this case, it can be useful to consider a mixture of those simple distribution functions. Today we are discussing the logic behind mixture distributions and implement it in Excel using an example of a normal-Cauchy mixture.
Don't forget to subscribe to NEDL and give this video a thumbs up for more videos in Finance!
Please consider supporting NEDL on Patreon: / nedleducation

[@NEDLeducation]

You can find the spreadsheets for this video and some additional materials here: drive.google.com/drive/folders/1sP40IW0p0w5IETCgo464uhDFfdyR6rh7
Please consider supporting NEDL on Patreon: www.patreon.com/NEDLeducation

[@nazarbond3161]

Very cool video. However, can you plz make a video on how to apply distributions to stock price prediction. Or how to apply the understanding of distribution in practice. Thank you!

[@cardulio8899]

Price prediction cannot be done using solely the distribution. The best prediction for the future price is the current price. The distributions can be used for risk management or option pricing mainly.

[@mickkorrawit2386]

This is very useful and applicable. Thank you.

[@dchoudhary5449]

Very nice video. How can we draw random variable from the Mixture distribution and perform Monte Carlo Simulation.

[@walterpitman]

Hi Nedl, i really enjoy yours videos at excel. Could you please make a video explanation about this type of constrain in the efficient frontier called Conditional Drawdown-at-Risk (CDaR) proposed by Chekhlov and similars like drawdown beta. I have some references uryasev.ams.stonybrook.edu/wp-content/uploads/2021/10/Drawdown_Portfolio_Optimization_Problems_and_Drawdown_Betas.pdf and www.ise.ufl.edu/uryasev/files/2011/11/drawdown.pdf