A heavy-tailed distribution for ARCH residuals with application to volatility prediction
AbstractThe quest for the â€˜bestâ€™ heavy-tailed distribution for ARCH/GARCH residuals appears to still be ongoing. In this connection, we propose a new distribution that arises in a natural way as an outcome of an implicit model. The challenging application of prediction of squared returns is also discussed; an optimal predictor is formulated, and the usefulness of the new distribution for prediction is demonstrated on three real datasets.
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Bibliographic InfoPaper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number qt7r89639x.
Date of creation: 01 Jan 2004
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Heteroscedasticity; Kyrtosis; Time Series;
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EERI Research Paper Series
EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
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