Stylized Facts of Return Series, Robust Estimates, and Three Popular Models of Volatility
AbstractFinancial return series of sufficiently high frequency display stylized facts such as volatility clustering, high kurtosis, low starting and slow-decaying autocorrelation function of squared returns and the so-called Taylor effect. In order to evaluate the capacity of volatility models to reproduce these facts, we apply both standard and robust measures of kurtosis and autocorrelation of squares to first-order GARCH, EGARCH and ARSV models. Robust measures provide a fresh view of stylized facts which is useful because many financial time series can be viewed as being contaminated with outliers.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 662.
Length: 51 pages
Date of creation: 01 Jun 2007
Date of revision: 05 Jun 2007
Publication status: Published as Teräsvirta, Timo and Zhenfang Zhao, 'Stylized Facts of Return Series, Robust Estimates, and Three Popular Models of Volatility' in Applied Financial Economics, 2011, pages 67-94.
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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
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More information through EDIRC
GARCH; EGARCH; ARSV; extreme observations; autocorrelation function; kurtosis; robust measure; confidence region.;
Other versions of this item:
- Timo Terasvirta & Zhenfang Zhao, 2011. "Stylized facts of return series, robust estimates and three popular models of volatility," Applied Financial Economics, Taylor & Francis Journals, vol. 21(1-2), pages 67-94.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-11 (All new papers)
- NEP-ECM-2007-06-11 (Econometrics)
- NEP-ETS-2007-06-11 (Econometric Time Series)
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- Christina Amado & Timo Teräsvirta, 2008.
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- Amado, Cristina & Teräsvirta, Timo, 2008. "Modelling Conditional and Unconditional Heteroskedasticity with Smoothly Time-Varying Structure," Working Paper Series in Economics and Finance 691, Stockholm School of Economics.
- Cristina Amado & Timo Teräsvirta, 2008. "Modelling Conditional and Unconditional Heteroskedasticity with Smoothly Time-Varying Structure," NIPE Working Papers 03/2008, NIPE - Universidade do Minho.
- Cristina Amado & Timo Teräsvirta, 2011.
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- Christophe Chorro & Dominique Guegan & Florian Ielpo & Hanjarivo Lalaharison, 2014. "Testing for Leverage Effect in Financial Returns," Documents de travail du Centre d'Economie de la Sorbonne 14022, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
- Lorenzo Pascual & Esther Ruiz & Diego Fresoli, 2011. "Bootstrap forecast of multivariate VAR models without using the backward representation," Statistics and Econometrics Working Papers ws113426, Universidad Carlos III, Departamento de Estadística y Econometría.
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