The autocorrelation structure of the Markov-switching asymmetric power GARCH process

Markus Haas

Statistics & Probability Letters, 2008, vol. 78, issue 12, 1480-1489

Abstract: In a recent paper, Liu [Liu, J.-C., 2007. Stationarity for a Markov-switching Box-Cox transformed threshold GARCH process. Statistics and Probability Letters 77, 1428-1438] proposed a generalization of the Markov-switching GARCH model of Haas et al. [Haas, M., Mittnik, S., Paolella, M.S., 2004. A new approach to Markov-switching GARCH models. Journal of Financial Econometrics 2, 493-530] to allow for a nonlinear relation between past shocks and future volatility as well as for the leverage effect, which refers to the observation that stock market volatility reacts differently to positive and negative shocks. For the new model, Liu [Liu, J.-C., 2007. Stationarity for a Markov-switching Box-Cox transformed threshold GARCH process. Statistics and Probability Letters 77, 1428-1438] derived conditions for stationarity and the existence of moments. This article complements Liu's [Liu, J.-C., 2007. Stationarity for a Markov-switching Box-Cox transformed threshold GARCH process. Statistics and Probability Letters 77, 1428-1438] results in two directions. First, a simple method for calculating the moments and the autocorrelation structure of the power-transformed absolute process is devised, which is of vital interest in applied GARCH modeling. Second, in an application to stock returns, the relevance of the extended Markov-switching GARCH process proposed by Liu [Liu, J.-C., 2007. Stationarity for a Markov-switching Box-Cox transformed threshold GARCH process. Statistics and Probability Letters 77, 1428-1438], as compared to simpler versions, is illustrated.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167-7152(07)00447-6
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:stapro:v:78:y:2008:i:12:p:1480-1489

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
https://shop.elsevie ... _01_ooc_1&version=01

Access Statistics for this article

Statistics & Probability Letters is currently edited by Somnath Datta and Hira L. Koul

More articles in Statistics & Probability Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().