Template-Type: ReDIF-Paper 1.0
Author-Name: Franses, Ph.H.B.F.
Author-Name-Last: Franses
Author-Name-First: Philip Hans
Author-Person: pfr226
Author-Name: van der Leij, M.J.
Author-Name-Last: van der Leij
Author-Name-First: Marco
Author-Name: Paap, R.
Author-Name-Last: Paap
Author-Name-First: Richard
Author-Person: ppa494
Title: A simple test for GARCH against a stochastic volatility
Abstract: The GARCH model and the Stochastic Volatility [SV] model are competing but non-nested models to describe unobserved volatility in asset returns. We propose a GARCH model with an additional error term, which can capture SV model properties, and which can be used to test GARCH against SV. We discuss model representation, parameter estimation and a simple test for model selection. Furthermore, we derive the theoretical moments and the autocorrelation function of our new model. We illustrate its merits for 9 daily stock return series.
Creation-Date: 2005-01-01
File-URL: https://repub.eur.nl/pub/7028/ei2005-41.pdf
File-Format: application/pdf
Series: RePEc:ems:eureir
Number: EI 2005-41
Keywords: GARCH, model selection, stochastic volatility
Handle: RePEc:ems:eureir:7028