The Capitalized Generalized Autoregressive Conditional Heteroskedasticity

Katlego Kola and Tumellano Sebehela ()
Additional contact information
Katlego Kola: School of Construction Economics & Management, WITS University, Johannesburg 2050, South Africa
Tumellano Sebehela: School of Construction Economics & Management, WITS University, Johannesburg 2050, South Africa

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2022, vol. 25, issue 03, 1-29

Abstract: The aim of this paper is to shed new light on hedging discrete volatilities, in particular when using the generalized autoregressive conditional heteroskedasticity (thereafter GARCH) model. Despite its elegance, GARCH does not account for (i) correlation coefficients of debt and equity, (ii) equity parameter, (iii) risk premium, (iv) interest rates, and (v) shocks-stock markets. The unaccounted listed parameters are included into the GARCH(1,1) and the paper inverts a new model, expanded GARCH, called the capitalized GARCH. The results show that the capitalized GARCH convergences in a similar manner to the GARCH(1,1) in modeling volatility of bonds, commodities, equities, and real estate indices.

Keywords: GARCH (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219091522500175
Access to full text is restricted to subscribers

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:wsi:rpbfmp:v:25:y:2022:i:03:n:s0219091522500175

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219091522500175

Access Statistics for this article

Review of Pacific Basin Financial Markets and Policies (RPBFMP) is currently edited by Cheng-few Lee

More articles in Review of Pacific Basin Financial Markets and Policies (RPBFMP) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().