A Heavy-Tailed Distribution for ARCH Residuals with Application to Volatility Prediction

Dimitris Politis ()
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Dimitris Politis: Department of Mathematics, University of California

Annals of Economics and Finance, 2004, vol. 5, issue 2, 283-298

Abstract: The quest for the `best' heavy-tailed distribution for ARCH/GARCH residuals appears to still be ongoing. In this connection, we propose a new distribution that arises in a natural way as an outcome of an implicit model. The challenging application of prediction of squared returns is also discussed; an optimal predictor is formulated, and the usefulness of the new distribution for prediction is demonstrated on three real datasets.

Keywords: Heteroscedasticity; Kyrtosis; Maximum likelihood; Time series (search for similar items in EconPapers)
JEL-codes: C3 C5 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2004:v:5:i:2:p:283-298

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