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Univariate Autoregressive Conditional Heteroskedasticity Models: An Application to the Peruvian Stock Market Returns

Author

Listed:
  • Paul Bedón Garcia

    ( Departamento de Economía de la Pontificia Universidad Católica del Perú)

  • Gabriel Rodriguez

    ( Departamento de Economía de la Pontificia Universidad Católica del Perú)

Abstract

An extensive family of univariate models of autoregressive conditional heteroskedasticity is applied to Peruís daily stock market returns for the period January 3, 1992 to March 30, 2012 (5053 observations) with four di§erent speciÖcations related to the distribution of the disturbance term. This concerns capturing the asymmetries of the behavior of the volatility, as well as the presence of heavy tails in these time series. Using di§erent statistical tests and di§erent criteria, the results show the following: (i) the FIGARCH (1,1)-t is the best model among all symmetric models while the FIEGARCH (1,1)-Sk is selected from the class of asymmetrical models. Also, the model FIAPARCH (1,1)-t is selected from the class of asymmetric power models; (ii) the three models capture well the behavior of the conditional volatility; (iii) the model FIEGARCH (1,1)-Sk is the one with the best performance in terms of prediction; (iv) however, the empirical distribution of the standardized residuals shows that the behavior of the tails is not well captured by either model; (v) the three models suggest the presence of long memory with estimates of the fractional parameter close to the nonstationarity region. JEL Classification-JEL: C22, C52, C58, G12, G17

Suggested Citation

  • Paul Bedón Garcia & Gabriel Rodriguez, 2015. "Univariate Autoregressive Conditional Heteroskedasticity Models: An Application to the Peruvian Stock Market Returns," Documentos de Trabajo / Working Papers 2015-400, Departamento de Economía - Pontificia Universidad Católica del Perú.
    • Handle: RePEc:pcp:pucwps:wp00400
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    File URL: http://repositorio.pucp.edu.pe/index/handle/123456789/52507
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    Citations

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    Cited by:

    1. Willy Alanya & Gabriel Rodríguez, 2019. "Asymmetries in Volatility: An Empirical Study for the Peruvian Stock and Forex Markets," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 22(01), pages 1-18, March.

    More about this item

    Keywords

    Univariate Autoregressive Conditional Heteroskedasticity Models; Peruvian Stock Market Returns; Volatility; Simmetries; Asymmetries; Normal; t-Student; Skewed t-Student; GED Distributions.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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