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Estimation of stable distributions by indirect inference

  • Garcia, René
  • Renault, Eric
  • Veredas, David

This article deals with the estimation of the parameters of an [alpha]-stable distribution with indirect inference, using the skewed-t distribution as an auxiliary model. The latter distribution appears as a good candidate since it has the same number of parameters as the [alpha]-stable distribution, with each parameter playing a similar role. To improve the properties of the estimator in finite sample, we use constrained indirect inference. In a Monte Carlo study we show that this method delivers estimators with good properties in finite sample. We provide an empirical application to the distribution of jumps in the S&P 500 index returns.

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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 161 (2011)
Issue (Month): 2 (April)
Pages: 325-337

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Handle: RePEc:eee:econom:v:161:y:2011:i:2:p:325-337
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