IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Small-sample Properties of Estimators in an ARCH(1) and GARCH(1,1) Model with a Generalized Error Distribution: a Robustness Study

  • Ralf Pauly

    ()

  • Peter Kosater
Registered author(s):

    GARCH Models have become a workhouse in volatility forecasting of financial and monetary market time series. In this article, we assess the small sample properties in estimation and the performance in volatility forecasting of four competing distribution free methods, including quasi-maximum likelihood and three regression based methods. The study is carried out by means of Monte Carlo simulations. To guarantee an utmost realistic framework, simulated time series are generated from a mixture of two symmetric generalized error distributions. This data generating process allow to reproduce the stylized facts of financial time series, in particular, peakedness and skewness. The results of the study suggest that regression based methods can be an asset in volatility forecasting, since model parameters are subject to structural change over time and the efficiency of the quasi- maximum likelihood method is confined to large sample sizes. Furthermore, the good performance of forecasts based on the historical volatility supports to use the variance targeting method for volatility forecasting.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://web.fb9.uni-osnabrueck.de/repec/iee/wpaper/12906270_WP_73.pdf
    Download Restriction: no

    Paper provided by Institute of Empirical Economic Research in its series Working Papers with number 73.

    as
    in new window

    Length: 35
    Date of creation: 06 Dec 2005
    Date of revision:
    Handle: RePEc:iee:wpaper:wp0073
    Contact details of provider: Postal: Rolandstrasse 8, 49069 Osnabrueck
    Phone: 00495419692632
    Fax: 0541/969-6142
    Web page: http://www.iew.uni-osnabrueck.de/
    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:iee:wpaper:wp0073. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Arjeta Gringmuth)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.