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A Local Instrumental Variable Estimation Method For Generalized Additive Volatility Models

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  • Woocheol Kim
  • Oliver Linton

Abstract

We investigate a new separable nonparametric model for time series, which includes many ARCH models and AR models already discussed in the literature. We also propose a new estimation procedure called LIVE, or local instrumental variable estimation, that is based on a localization of the classical instrumental variable method. Our method has considerable computational advantages over the competing marginal integration or projection method. We also consider a more efficient two-step likelihood-based procedure, and show that this yields both asymptotic and finite sample performance gains.

Suggested Citation

  • Woocheol Kim & Oliver Linton, 2004. "A Local Instrumental Variable Estimation Method For Generalized Additive Volatility Models," FMG Discussion Papers dp509, Financial Markets Group.
    • Handle: RePEc:fmg:fmgdps:dp509
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    Cited by:

    1. Chen, Bin & Song, Zhaogang, 2013. "Testing whether the underlying continuous-time process follows a diffusion: An infinitesimal operator-based approach," Journal of Econometrics, Elsevier, vol. 173(1), pages 83-107.
    2. Chen, Bin & Hong, Yongmiao, 2012. "Testing For The Markov Property In Time Series," Econometric Theory, Cambridge University Press, vol. 28(1), pages 130-178, February.
    3. Heejoon Han & Shen Zhang, 2012. "Non‐stationary non‐parametric volatility model," Econometrics Journal, Royal Economic Society, vol. 15(2), pages 204-225, June.
    4. repec:wyi:journl:002062 is not listed on IDEAS

    More about this item

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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