Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103638
Authors: 
McAleer, Michael
Hafner, Christian M.
Year of Publication: 
2014
Citation: 
[Journal:] Econometrics [ISSN:] 2225-1146 [Publisher:] MDPI [Place:] Basel [Volume:] 2 [Year:] 2014 [Issue:] 2 [Pages:] 92-97
Abstract: 
One of the most popular univariate asymmetric conditional volatility models is the exponential GARCH (or EGARCH) specification. In addition to asymmetry, which captures the different effects on conditional volatility of positive and negative effects of equal magnitude, EGARCH can also accommodate leverage, which is the negative correlation between returns shocks and subsequent shocks to volatility. However, the statistical properties of the (quasi-) maximum likelihood estimator of the EGARCH parameters are not available under general conditions, but rather only for special cases under highly restrictive and unverifiable conditions. It is often argued heuristically that the reason for the lack of general statistical properties arises from the presence in the model of an absolute value of a function of the parameters, which does not permit analytical derivatives, and hence does not permit (quasi-) maximum likelihood estimation. It is shown in this paper for the non-leverage case that: (1) the EGARCH model can be derived from a random coefficient complex nonlinear moving average (RCCNMA) process; and (2) the reason for the lack of statistical properties of the estimators of EGARCH under general conditions is that the stationarity and invertibility conditions for the RCCNMA process are not known.
Subjects: 
leverage
asymmetry
existence
random coefficient models
complex non-linear moving average process
JEL: 
C22
C52
C58
G32
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/3.0/
Document Type: 
Article
Appears in Collections:

Files in This Item:
File
Size
217.07 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.