Please use this identifier to cite or link to this item:
Yang, Lijian
Härdle, Wolfgang
Nielsen, Jens P.
Year of Publication: 
Series/Report no.: 
SFB 373 Discussion Paper 1998,107
For over a decade, nonparametric modelling has been successfully applied to study nonlinear structures in financial time series. It is well known that the usual nonparametric models often have less than satisfactory performance when dealing with more than one lag. When the mean has an additive structure, however, better estimation methods are available which fully exploit such a structure. Although in the past such nonparametric applications had been focused more on the estimation of the conditional mean, it is equally if not more important to measure the future risk of the series along with the mean. For the volatility function, i.e., the conditional variance given the past, a multiplicative structure is more appropriate than an additive one, as the volatility is a positive scale function and a multiplicative model provides a better interpretation of each lagged value's influence on such a function. In this paper we consider the joint estimation of both the additive mean and the multiplicative volatility. The technique used is marginally integrated local polynomial estimation. The procedure is applied to the DEM/USD (Deutsche Mark/US Dollar) daily exchange returns.
Additive Mean
Geometric Ergodicity
Geometric Mixing
Local Polynomial Regression
Marginal Integration
Multiplicative Volatility
Stationary Probability Density
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
450.09 kB

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