Inequality Constraints in the Univariate GARCH Model

Daniel B Nelson and Charles Cao

Journal of Business & Economic Statistics, 1992, vol. 10, issue 2, 229-35

Abstract: To keep the conditional variances generated by the generalized autoregressive conditional heteroscedastic (p, q) model nonnegative, T. Bollerslev imposed nonnegativity constraints on the parameters of the process. The authors show that these constraints can be substantially weakened and so should not be imposed in estimation. They also provide empirical examples illustrating the importance of relaxing these constraints.

Date: 1992
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