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Semiparametric score driven volatility models

Author

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  • Blasques, Francisco
  • Ji, Jiangyu
  • Lucas, André

Abstract

A new semiparametric observation-driven volatility model is proposed. In contrast to the standard semiparametric generalized autoregressive conditional heteroskedasticity (GARCH) model, the form of the error density has a direct influence on both the semiparametric likelihood and the volatility dynamics. The estimator is shown to consistently estimate the conditional pseudo true parameters of the model. Simulation-based evidence and an empirical application to stock return data confirm that the new statistical model realizes substantial improvements compared to GARCH type models and quasi-maximum likelihood estimation if errors are fat-tailed and possibly skewed.

Suggested Citation

  • Blasques, Francisco & Ji, Jiangyu & Lucas, André, 2016. "Semiparametric score driven volatility models," Computational Statistics & Data Analysis, Elsevier, vol. 100(C), pages 58-69.
    • Handle: RePEc:eee:csdana:v:100:y:2016:i:c:p:58-69
    DOI: 10.1016/j.csda.2015.04.003
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    References listed on IDEAS

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    Cited by:

    1. Gorgi, Paolo & Koopman, Siem Jan & Li, Mengheng, 2019. "Forecasting economic time series using score-driven dynamic models with mixed-data sampling," International Journal of Forecasting, Elsevier, vol. 35(4), pages 1735-1747.
    2. Lucas, André & Zhang, Xin, 2016. "Score-driven exponentially weighted moving averages and Value-at-Risk forecasting," International Journal of Forecasting, Elsevier, vol. 32(2), pages 293-302.
    3. Janneke van Brummelen & Paolo Gorgi & Siem Jan Koopman, 2025. "Score-driven time-varying parameter models with splinebased densities," Tinbergen Institute Discussion Papers 25-011/III, Tinbergen Institute.
    4. Pierluigi Vallarino, 2024. "Dynamic kernel models," Tinbergen Institute Discussion Papers 24-082/III, Tinbergen Institute.

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