Functional GARCH models: The quasi-likelihood approach and its applications

Clément Cerovecki, Christian Francq, Siegfried Hörmann and Jean-Michel Zakoian

Journal of Econometrics, 2019, vol. 209, issue 2, 353-375

Abstract: The increasing availability of high frequency data has initiated many new research areas in statistics. Functional data analysis (FDA) is one such innovative approach towards modelling time series data. In FDA, densely observed data are transformed into curves and then each (random) curve is considered as one data object. A natural, but still relatively unexplored, context for FDA methods is related to financial data, where high-frequency trading currently takes a significant proportion of trading volumes. Recently, articles on functional versions of the famous ARCH and GARCH models have appeared. Due to their technical complexity, existing estimators of the underlying functional parameters are moment based—an approach which is known to be relatively inefficient in this context. In this paper, we promote an alternative quasi-likelihood approach, for which we derive consistency and asymptotic normality results. We support the relevance of our approach by simulations and illustrate its use by forecasting realised volatility of the S&P100 Index.

Keywords: Functional time series; High-frequency volatility models; Intraday returns; Functional QMLE; Stationarity of functional GARCH (search for similar items in EconPapers)
JEL-codes: C13 C32 C58 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Working Paper: Functional GARCH models: the quasi-likelihood approach and its applications (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:209:y:2019:i:2:p:353-375

DOI: 10.1016/j.jeconom.2019.01.006

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