Conditional asymmetry in Power ARCH(∞) models

Julien Royer

Journal of Econometrics, 2023, vol. 234, issue 1, 178-204

Abstract: We consider an extension of ARCH(∞) models to account for conditional asymmetry in the presence of high persistence. After stating existence and stationarity conditions, this paper develops the statistical inference of such models and proves the consistency and asymptotic distribution of a Quasi Maximum Likelihood estimator. Some particular specifications are studied and we introduce a Portmanteau goodness-of-fit test. Additionally, test procedures for asymmetry and GARCH validity are derived. Finally, we present an application on a set of equity indices to reexamine the preeminence of GARCH(1,1) specifications. We find strong evidence that the short memory feature of such models is not suitable for peripheral assets.

Keywords: Quasi Maximum Likelihood Estimation; Moderate memory; Testing parameters on the boundary; Recursive design bootstrap (search for similar items in EconPapers)
JEL-codes: C22 C51 C58 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:234:y:2023:i:1:p:178-204

DOI: 10.1016/j.jeconom.2021.10.013

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