Are GARCH innovations independent - a long term assessment for the S&P 500

Helmut Herwartz

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

Abstract: GARCH specifications have been widely applied in financial literature and practice. For purposes of (Quasi) ML (QML) estimation innovations to GARCH processes are assumed identically and independently distributed (iid) with mean zero and unit variance. In this note GARCH innovations entering daily S\&P 500 quotes are diagnosed to lack independence and to signal ex-ante the directions of stock price changes.

JEL-codes: C01 C22 G14 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc15:113109

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