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A Stationary Spatio‐Temporal GARCH Model

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  • Sondre Hølleland
  • Hans Arnfinn Karlsen

Abstract

We introduce a lagged nearest‐neighbour, stationary spatio‐temporal generalized autoregressive conditional heteroskedasticity (GARCH) model on an infinite spatial grid that opens for GARCH innovations in a space‐time ARMA model. This is illustrated by a real data application to a classical dataset of sea surface temperature anomalies in the Pacific Ocean. The model and its translation invariant neighbourhood system are wrapped around a torus forming a model with finite spatial domain, which we call circular spatio‐temporal GARCH. Such a model could be seen as an approximation of the infinite one and simulation experiments show that the circular estimator with a straightforward bias correction performs well on such non‐circular data. Since the spatial boundaries are tied together, the well‐known boundary issue in spatial statistical modelling is effectively avoided. We derive stationarity conditions for these circular processes and study the spatio‐temporal correlation structure through an ARMA representation. We also show that the matrices defined by a vectorized version of the model are block circulants. The maximum quasi‐likelihood estimator is presented and we prove its strong consistency and asymptotic normality by generalizing results from univariate GARCH theory.

Suggested Citation

  • Sondre Hølleland & Hans Arnfinn Karlsen, 2020. "A Stationary Spatio‐Temporal GARCH Model," Journal of Time Series Analysis, Wiley Blackwell, vol. 41(2), pages 177-209, March.
    • Handle: RePEc:bla:jtsera:v:41:y:2020:i:2:p:177-209
    DOI: 10.1111/jtsa.12498
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    References listed on IDEAS

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    Cited by:

    1. Philipp Otto & Wolfgang Schmid, 2023. "A general framework for spatial GARCH models," Statistical Papers, Springer, vol. 64(5), pages 1721-1747, October.
    2. Philipp Otto & Osman Dou{g}an & Suleyman Tac{s}p{i}nar & Wolfgang Schmid & Anil K. Bera, 2023. "Spatial and Spatiotemporal Volatility Models: A Review," Papers 2308.13061, arXiv.org.
    3. Bing Su & Fukang Zhu & Ke Zhu, 2023. "Statistical inference for the logarithmic spatial heteroskedasticity model with exogenous variables," Papers 2301.06658, arXiv.org.
    4. Philipp Otto, 2022. "A Multivariate Spatial and Spatiotemporal ARCH Model," Papers 2204.12472, arXiv.org.
    5. Philipp Otto & Osman Dou{g}an & Suleyman Tac{s}p{i}nar, 2022. "Dynamic Spatiotemporal ARCH Models," Papers 2202.13856, arXiv.org.

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