We investigate several aspects of GARCH(p,q) models which are relevant for empirical applications. In particular, we note that the inclusion of a dummy variable as regressor can lead to multimodality in the GARCH likelihood. This makes standard inference on the estimated coefficient impossible. Next, we investigate the implementation of different restrictions on the GARCH parameter space. We present a small refinement to the Nelson-Cao (1992) conditions for a GARCH(2,q) model, and show how these can be implemented by parameter transformations. We argue that these conditions are also too restrictive, and consider restrictions which are formulated in terms of the unconditional variance. These are easier to work with and understand. Finally, we show that multimodality is a real concern for models of the pounds exchange rate, and should be taken account of, especially when p >= 2.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Find related papers by JEL classification: C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)