Bayesian estimation of an extended local scale stochastic volatility model
Journal of Econometrics, 2011, vol. 162, issue 2, 369-382
A new version of the local scale model of Shephard (1994) is presented. Its features are identically distributed evolution equation disturbances, the incorporation of in-the-mean effects, and the incorporation of variance regressors. A Bayesian posterior simulator and a new simulation smoother are presented. The model is applied to publicly available daily exchange rate and asset return series, and is compared with t-GARCH and Lognormal stochastic volatility formulations using Bayes factors.
Keywords: State; space; models; Markov; chain; Monte; Carlo; Simulation; smoothing; Generalized; error; distribution; Generalized; t; distribution (search for similar items in EconPapers)
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Working Paper: Bayesian estimation of an extended local scale stochastic volatility model (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:162:y:2011:i:2:p:369-382
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