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Testing Nonlinearity through a Logistic Smooth Transition AR Model with Logistic Smooth Transition GARCH Errors

Author

Listed:
  • Mohamed Chikhi

    (Laboratory for Quantitative Applications in Economics and Finance, Ouargla University, Algeria)

  • Claude Diebolt

    (BETA, University of Strasbourg Strasbourg, France)

Abstract

This paper analyzes the cyclical behavior of CAC 40 by testing the existence of nonlinearity through a logistic smooth transition AR model with logistic smooth transition GARCH errors. We study the daily returns of CAC 40 from 1990 to 2018. We estimate several models using nonparametric maximum likelihood, where the innovation distribution is replaced by a nonparametric estimate for the density function. We find that the rate of transition and the threshold value in both the conditional mean and conditional variance are highly significant. The forecasting results show that the informational shocks have transitory effects on returns and volatility and confirm nonlinearity.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Mohamed Chikhi & Claude Diebolt, 2019. "Testing Nonlinearity through a Logistic Smooth Transition AR Model with Logistic Smooth Transition GARCH Errors," Working Papers 03-19, Association Française de Cliométrie (AFC).
  • Handle: RePEc:afc:wpaper:03-19
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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