Nonnegative GARCH-type models with conditional Gamma distributions and their applications

Eunju Hwang and ChanHyeok Jeon

Computational Statistics & Data Analysis, 2024, vol. 198, issue C

Abstract: Most of real data are characterized by positive, asymmetric and skewed distributions of various shapes. Modelling and forecasting of such data are addressed by proposing nonnegative conditional heteroscedastic time series models with Gamma distributions. Three types of time-varying parameters of Gamma distributions are adopted to construct the nonnegative GARCH models. A condition for the existence of a stationary Gamma-GARCH model is given. Parameter estimates are discussed via maximum likelihood estimation (MLE) method. A Monte-Carlo study is conducted to illustrate sample paths of the proposed models and to see finite-sample validity of the MLEs, as well as to evaluate model diagnostics using standardized Pearson residuals. Furthermore, out-of-sample forecasting analysis is performed to compute forecasting accuracy measures. Applications to oil price and Bitcoin data are given, respectively.

Keywords: Conditional heteroscedastic model; Gamma distribution; MLE; Forecasting (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:csdana:v:198:y:2024:i:c:s0167947324000902

DOI: 10.1016/j.csda.2024.108006

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