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Modeling stock markets' volatility using GARCH models with normal, Student's t and stable Paretian distributions
- Source :
- Repositório Científico de Acesso Aberto de Portugal, Repositório Científico de Acesso Aberto de Portugal (RCAAP), instacron:RCAAP
- Publication Year :
- 2009
- Publisher :
- Springer, 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. info:eu-repo/semantics/acceptedVersion
- Subjects :
- Statistics and Probability
Normal distribution
Ciências Naturais::Matemáticas [Domínio/Área Científica]
Non-Gaussian distributions
Autoregressive conditional heteroskedasticity
Conditional heteroskedasticity
Economics
Econometrics
T distribution
Statistics, Probability and Uncertainty
Volatility (finance)
Stock market index
Stock (geology)
Subjects
Details
- Language :
- English
- Database :
- OpenAIRE
- Journal :
- Repositório Científico de Acesso Aberto de Portugal, Repositório Científico de Acesso Aberto de Portugal (RCAAP), instacron:RCAAP
- Accession number :
- edsair.doi.dedup.....da9a6a4d6c9de96898b6ca9d47edb3e5