1. On the statistical properties of multiplicative GARCH models
- Author
-
Conrad, Christian and Kleen, Onno
- Subjects
Statistics::Theory ,Statistics::Applications ,ARCH-Modell ,volatility component model ,long-term volatility ,GARCH-MIDAS ,330 Economics ,Forecast evaluation ,Mincer-Zarnowitz regression ,volatility persistence ,ddc:330 ,Statistics::Methodology ,Statistische Methodenlehre - Abstract
We examine the statistical properties of multiplicative GARCH models. First, we show that in multiplicative models, returns have higher kurtosis and squared returns have a more persistent autocorrelation function than in the nested GARCH model. Second, we extend the results of Andersen and Bollerslev (1998) on the upper bound of the R2 in a Mincer-Zarnowitz regression to the case of a multiplicative GARCH model, using squared returns as a proxy for the true but unobservable conditional variance. Our theoretical results imply that multiplicative GARCH models provide an explanation for stylized facts that cannot be captured by classical GARCH modeling.
- Published
- 2016