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Stylized Facts of Return Series, Robust Estimates, and Three Popular Models of Volatility

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Author Info
Teräsvirta, Timo () (Dept. of Economic Statistics, Stockholm School of Economics)
Zhao, Zhenfang () (Dept. of Economic Statistics, Stockholm School of Economics)

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Abstract

Financial 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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Publisher Info
Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 662.

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Length: 51 pages
Date of creation: 01 Jun 2007
Date of revision: 05 Jun 2007
Handle: RePEc:hhs:hastef:0662

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Related research
Keywords: GARCH; EGARCH; ARSV; extreme observations; autocorrelation function; kurtosis; robust measure; confidence region.;

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Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing

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  1. Christina Amado & Timo Teräsvirta, 2008. "Modelling Conditional and Unconditional Heteroskedasticity with Smoothly Time-Varying Structure," CREATES Research Papers 2008-08, School of Economics and Management, University of Aarhus. [Downloadable!]
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