Neglecting parameter changes in GARCH models

Volume: 129, Issue: 1-2, Pages: 121 - 138
Published: Nov 1, 2005
Abstract
If a GARCH model is estimated on a time series that contains parameter changes in the conditional volatility process and these parameter changes are not accounted for, a distinct error in the estimation occurs: The sum of the estimated autoregressive parameters of the conditional variance converges to one. In finite samples, the sum of the estimated autoregressive parameters is heavily biased towards one. This paper shows that this convergence...
Paper Details
Title
Neglecting parameter changes in GARCH models
Published Date
Nov 1, 2005
Volume
129
Issue
1-2
Pages
121 - 138
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