Gamma stochastic volatility models

N. Balakrishna, Bovas Abraham and Ranjini Sivakumar
Additional contact information
N. Balakrishna: Cochin University of Science and Technology, India, Postal: Cochin University of Science and Technology, India
Bovas Abraham: University of Waterloo, Canada, Postal: University of Waterloo, Canada
Ranjini Sivakumar: University of Waterloo, Canada, Postal: University of Waterloo, Canada

Journal of Forecasting, 2006, vol. 25, issue 3, pages 153-171

Abstract: This paper presents gamma stochastic volatility models and investigates its distributional and time series properties. The parameter estimators obtained by the method of moments are shown analytically to be consistent and asymptotically normal. The simulation results indicate that the estimators behave well. The in-sample analysis shows that return models with gamma autoregressive stochastic volatility processes capture the leptokurtic nature of return distributions and the slowly decaying autocorrelation functions of squared stock index returns for the USA and UK. In comparison with GARCH and EGARCH models, the gamma autoregressive model picks up the persistence in volatility for the US and UK index returns but not the volatility persistence for the Canadian and Japanese index returns. The out-of-sample analysis indicates that the gamma autoregressive model has a superior volatility forecasting performance compared to GARCH and EGARCH models. Copyright © 2006 John Wiley _ Sons, Ltd.

Downloads: (external link)
http://hdl.handle.net/10.1002/for.982 Link to full text; subscription required (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Access Statistics for this article

Journal of Forecasting is edited by Derek W. Bunn

More articles in Journal of Forecasting from John Wiley & Sons, Ltd.
Series data maintained by Christopher F. Baum ().