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Properties of the QMLE and the Weighted LSE for LARCH(q) Models

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  • Christian FRANCQ

    (Crest)

  • Jean-Michel ZAKOIAN

    (Crest)

Abstract

This paper considers a class of finite-order autoregressive linear ARCH models. The model captures theleverage effect, allows the volatility to be zero and to reach its minimum for non-zero innovations, and isappropriate for long-memory modeling when infinite orders are allowed. However, the quasi-maximum likelihoodestimator is, in general, inconsistent. A self-weighted least-squares estimator is proposed and is shownto be asymptotically normal. A score test for conditional homoscedasticity and diagnostic portmanteau testsare developed. Their performance is illustrated via simulation experiments. It is also investigated whetherstock market returns exhibit some of the characteristic features of the linear ARCH model.

Suggested Citation

  • Christian FRANCQ & Jean-Michel ZAKOIAN, 2009. "Properties of the QMLE and the Weighted LSE for LARCH(q) Models," Working Papers 2009-19, Center for Research in Economics and Statistics.
  • Handle: RePEc:crs:wpaper:2009-19
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