Nonparametric and Semiparametric Volatility Models: Specification, Estimation, and Testing

Publication Type

Book Chapter

Publication Date

2012

Abstract

In recent years, an extensive literature has developed on studying the volatility in financial markets. The simplest approach in this literature regards volatility as a time-invariant constant parameter σ. However, this is contradicted in some of the real world financial data, where a specific pattern of return variability is observed. These changes are often referred to as the volatility clustering and as first noted by Mandelbrot (1963), this is the property of prices that "large changes tend to be followed by large changes—of either sign—and small changes tend to be followed by small changes." As a consequence, there has been a concerted attempt to model this time-varying volatility.

Keywords

nonparametric semiparametric volatility models, nonparametric semiparametric multivariate volatility models, error density specification

Discipline

Econometrics

Research Areas

Econometrics

Publication

Handbook of volatility models and their applications

Editor

Luc Bauwens, Christian Hafner & Sebastien Laurent

First Page

269

Last Page

291

ISBN

9780470872512

Identifier

10.1002/9781118272039.ch11

Publisher

Wiley

City or Country

Hoboken, NJ

Comments

(Luc Bauwens, Christian Hafner, and Sebastien Laurent, editors) (forthcoming) - expected publication date April

Additional URL

https://doi.org/10.1002/9781118272039.ch11

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