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Can One Really Estimate Nonstationary GARCH Models ?

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  • Christian Francq

    (Crest)

  • Jean-Michel Zakoïan

    (Crest)

Abstract

Jensen and Rahbek (2004a) claim that consistency and asymptotic normality hold for the quasi-maximumlikelihood estimator (QMLE) of (!0, 0) in nonstationary ARCH(1) models. In fact their result onlyconcerns a constrained QMLE, in which the intercept is fixed, and under a reinforced nonstationaritycondition. Under this condition, we prove that the standard QMLE of 0 is strongly consistent andasymptotically normal. Numerical experiments reveal that QMLE of !0 is likely to be inconsistent.

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  • Christian Francq & Jean-Michel Zakoïan, 2008. "Can One Really Estimate Nonstationary GARCH Models ?," Working Papers 2008-06, Center for Research in Economics and Statistics.
    • Handle: RePEc:crs:wpaper:2008-06
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    References listed on IDEAS

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    1. Nelson, Daniel B., 1990. "Stationarity and Persistence in the GARCH(1,1) Model," Econometric Theory, Cambridge University Press, vol. 6(3), pages 318-334, September.
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    Cited by:

    1. Hafner, Christian M. & Preminger, Arie, 2015. "An ARCH model without intercept," Economics Letters, Elsevier, vol. 129(C), pages 13-17.

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