Stable-GARCH Models for Financial Returns: Fast Estimation and Tests for Stability
Department of Banking and Finance, University of Zurich, Plattenstrasse 14, 8032 Zurich, Switzerland
Swiss Finance Institute, Walchestrasse 9 CH-8006 Zurich, Switzerland
Academic Editor: Kerry Patterson
Received: 15 January 2016 / Revised: 23 March 2016 / Accepted: 27 April 2016 / Published: 5 May 2016
A fast method for estimating the parameters of a stable-APARCH not requiring likelihood or iteration is proposed. Several powerful tests for the (asymmetric) stable Paretian distribution with tail index
are used for assessing the appropriateness of the stable assumption as the innovations process in stable-GARCH-type models for daily stock returns. Overall, there is strong evidence against the stable as the correct innovations assumption for all stocks and time periods, though for many stocks and windows of data, the stable hypothesis is not rejected.
This is an open access article distributed under the Creative Commons Attribution License
which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).
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MDPI and ACS Style
Paolella, M.S. Stable-GARCH Models for Financial Returns: Fast Estimation and Tests for Stability. Econometrics 2016, 4, 25.
Paolella MS. Stable-GARCH Models for Financial Returns: Fast Estimation and Tests for Stability. Econometrics. 2016; 4(2):25.
Paolella, Marc S. 2016. "Stable-GARCH Models for Financial Returns: Fast Estimation and Tests for Stability." Econometrics 4, no. 2: 25.
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