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Modeling stock markets' volatility using GARCH models with Normal, Student's t and stable Paretian distributions.
- Source :
- Statistical Papers; Mar2009, Vol. 50 Issue 2, p311-321, 11p
- Publication Year :
- 2009
-
Abstract
- As GARCH models and stable Paretian distributions have been revisited in the recent past with the papers of Hansen and Lunde (J Appl Econom 20: 873-889, 2005) and Bidarkota and McCulloch (Quant Finance 4: 256--265, 2004), respectively, in this paper we discuss alternative conditional distributional models for the daily returns of the US, German and Portuguese main stock market indexes, considering ARMA-GARCH models driven by Normal, Student's t and stable Paretian distributed innovations. We find that a GARCH model with stable Paretian innovations fits returns clearly better than the more popular Normal distribution and slightly better than the Student's t distribution. However, the Student's t outperforms the Normal and stable Paretian distributions when the out-of-sample density forecasts are considered. [ABSTRACT FROM AUTHOR]
- Subjects :
- STATISTICS
STOCKS (Finance)
INDEXES
MARKETS
MATHEMATICS
ECONOMETRICS
Subjects
Details
- Language :
- English
- ISSN :
- 09325026
- Volume :
- 50
- Issue :
- 2
- Database :
- Complementary Index
- Journal :
- Statistical Papers
- Publication Type :
- Academic Journal
- Accession number :
- 36604691
- Full Text :
- https://doi.org/10.1007/s00362-007-0080-5