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EGARCH models with fat tails, skewness and leverage

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  • Harvey, Andrew
  • Sucarrat, Genaro

Abstract

An EGARCH model in which the conditional distribution is heavy-tailed and skewed is proposed. The properties of the model, including unconditional moments, autocorrelations and the asymptotic distribution of the maximum likelihood estimator, are set out. Evidence for skewness in a conditional t-distribution is found for a range of returns series, and the model is shown to give a better fit than comparable skewed-t GARCH models in nearly all cases. A two-component model gives further gains in goodness of fit and is able to mimic the long memory pattern displayed in the autocorrelations of the absolute values.

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Bibliographic Info

Article provided by Elsevier in its journal Computational Statistics & Data Analysis.

Volume (Year): 76 (2014)
Issue (Month): C ()
Pages: 320-338

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Handle: RePEc:eee:csdana:v:76:y:2014:i:c:p:320-338

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Web page: http://www.elsevier.com/locate/csda

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Keywords: General error distribution; Heteroskedasticity; Leverage; Score; Student’s t; Two components; Volatility;

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Citations

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Cited by:
  1. Michele Caivano & Andrew Harvey, 2014. "Time series models with an EGB2 conditional distribution," Temi di discussione (Economic working papers) 947, Bank of Italy, Economic Research and International Relations Area.
  2. Harvey, A. & Luati, A., 2012. "Filtering with heavy tails," Cambridge Working Papers in Economics 1255, Faculty of Economics, University of Cambridge.
  3. Krenar Avdulaj & Jozef Barunik, 2013. "Can we still benefit from international diversification? The case of the Czech and German stock markets," Papers 1308.6120, arXiv.org, revised Sep 2013.
  4. M. Caivano & A. Harvey, 2013. "Two EGARCH models and one fat tail," Cambridge Working Papers in Economics 1326, Faculty of Economics, University of Cambridge.
  5. Krenar Avdulaj & Jozef Barunik, 2013. "Are benefits from oil - stocks diversification gone? A new evidence from a dynamic copulas and high frequency data," Papers 1307.5981, arXiv.org.

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