Connor, Gregory (2001) A structured GARCH model of daily equity return volatility. Financial Markets Group Discussion Papers (370). Financial Markets Group, The London School of Economics and Political Science, London, UK.
Full text not available from this repository.Abstract
This paper estimates a structural times series model of return volatility. We argue that the structural time series approach to GARCH modelling first suggested by Engle and Lee, has the potential to improve the empirical reliability of GARCH models, and greatly enhance their interpretability. In its structural form, our model has tow parts, a short-memory GARCH model with a time-varying benchmark variance, and a longer-memory exponential smoothing model of benchmark variance. In its reduced for, the model is equivalent to a restricted-coefficient version of the GARCH (2,2) model. We apply the model to daily equity index returns from seven countries over the period January 1980 - April 1997. The model significantly outperform unstructured GARCH in its ability to capture short, medium and long-term memory in daily return volatility.
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Official URL: | https://www.fmg.ac.uk/ |
| Additional Information: | © 2001 The Author |
| Divisions: | Financial Markets Group |
| Subjects: | H Social Sciences > HG Finance H Social Sciences > HB Economic Theory |
| JEL classification: | C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C10 - General |
| Date Deposited: | 28 Aug 2009 10:50 |
| Last Modified: | 11 Dec 2024 18:29 |
| URI: | http://eprints.lse.ac.uk/id/eprint/25043 |
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