Semiparametric ARCH Models

Robert Engle and Gloria Gonzalez-Rivera

Journal of Business & Economic Statistics, 1991, vol. 9, issue 4, 345-59

Abstract: A semiparametric ARCH model is introduced with conditional first and second moments given by ARMA and ARCH formulations, and a conditional density that is approximated by a nonparametric density estimator. For several densities, the relative efficiency of the quasi-maximum likelihood estimator is compared with maximum likelihood under correct specification. These potential efficiency gains for a fully adaptive procedure are compared in a Monte Carlo experiment with the observed gains from using the semiparametric procedure, and it is found that the estimator captures a substantial proportion of the potential. The estimator is applied to daily stock returns and to the British pound/dollar exchange rate.

Date: 1991
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Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:9:y:1991:i:4:p:345-59

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