Are Feedback Factors Important In Modelling Financial Data?
AbstractThis paper provides empirical evidence that continuous time models with one factor of volatility are, in some circumstances, able to fit the main characteristics of financial data and reports insights about the importance of introducing feedback factors for capturing the strong persistence caused by the presence of changes in the variance. We use the Efficient Method of Moments (EMM) by Gallant and Tauchen (1996) to estimate and to select among logarithmic models with one and two stochastic volatility factors (with and without feedback).
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Estadística y Econometría in its series Statistics and Econometrics Working Papers with number ws060101.
Date of creation: Jan 2006
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Other versions of this item:
- Helena Veiga, 2007. "Are Feedback Factors Important in Modeling Financial Data?," International Review of Finance, International Review of Finance Ltd., vol. 7(3-4), pages 105-118.
- NEP-ALL-2006-01-24 (All new papers)
- NEP-ETS-2006-01-24 (Econometric Time Series)
- NEP-FMK-2006-01-24 (Financial Markets)
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