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GMM estimation of a realized stochastic volatility model: A Monte Carlo study

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  • Pierre Chaussé
  • Dinghai Xu

Abstract

This article investigates alternative generalized method of moments (GMM) estimation procedures of a stochastic volatility model with realized volatility measures. The extended model can accommodate a more general correlation structure. General closed form moment conditions are derived to examine the model properties and to evaluate the performance of various GMM estimation procedures under Monte Carlo environment, including standard GMM, principal component GMM, robust GMM and regularized GMM. An application to five company stocks and one stock index is also provided for an empirical demonstration.

Suggested Citation

  • Pierre Chaussé & Dinghai Xu, 2018. "GMM estimation of a realized stochastic volatility model: A Monte Carlo study," Econometric Reviews, Taylor & Francis Journals, vol. 37(7), pages 719-743, August.
    • Handle: RePEc:taf:emetrv:v:37:y:2018:i:7:p:719-743
    DOI: 10.1080/07474938.2016.1152654
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