Empirical Studies on Volatility in International Stock by Eugenie M.J.H. Hol

By Eugenie M.J.H. Hol

Empirical stories on Volatility in foreign inventory Markets describes the present ideas for the size and estimation of volatility in foreign inventory markets with emphasis at the SV version and its empirical program. Eugenie Hol develops a variety of extensions of the SV version, which permit for extra variables in either the suggest and the variance equation. additionally, the forecasting functionality of SV versions is in comparison not just to that of the well-established GARCH version but additionally to implied volatility and so-called realised volatility versions that are in line with intraday volatility measures.
The meant readers are monetary execs who search to procure extra exact volatility forecasts and need to achieve perception approximately state of the art volatility modelling recommendations and their empirical price, and educational researchers and scholars who're attracted to monetary marketplace volatility and need to procure an up-to-date evaluate of a number of the tools on hand during this area.

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Jacquier et al. 99 for daily Standard & Poor’s 500 returns. GARCH(1,1) models, hereafter simply referred to as GARCH models, are stationary when the sum of α and β is smaller than one. 984 in its Student-t distributed counterpart. The parameter estimate for υ is then found to be statistically significant as is the likelihood ratio test statistic testing for υ = 0; this suggests that a better GARCH model fit is obtained when εt is assumed to follow a Student t-distribution. Since SV and GARCH models are not nested we cannot perform LR tests to distinguish between the two classes of models.

5ηt )εt with a zero mean but with a non-Gaussian density. Although SV models are seen as a competitive alternative to GARCH models their empirical application has been limited. This can mainly be attributed to the difficulties that arise as a result of the intractability of the likelihood function which prohibits its direct evaluation. However, in recent years considerable advances have been made in this area. The estimation techniques that have been proposed for SV models can be divided into two groups: those that seek to construct the full likelihood function and those that approximate it or avoid the issue altogether.

3 Empirical Applications of Time-Varying Volatility Models GARCH models and their various extensions have been widely applied to financial and economic time series and the empirical GARCH literature has grown dramatically over the past two decades. Initially many of these stock return studies investigated the lag lengths p and q in the GARCH(p, q) model and concluded that for most empirical implementations it was sufficient to adopt low orders 10 . Ever since the GARCH(1,1) model has become the standard GARCH model specification.

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