 Autoregressive Conditional HeteroscedasticityGebhard Kirchgässner, Juergen Wolters and Uwe Hassler Chapter 8 in Introduction to Modern Time Series Analysis, 2013, pp 281-310 from Springer Abstract: Abstract All models discussed so far use the conditional expectation to describe the mean development of one or more time series. The optimal forecast, in the sense that the variance of the forecast errors will be minimised, is given by the conditional mean of the underlying model. Here, it is assumed that the residuals are not only uncorrelated but also homoscedastic, i.e. that the unexplained fluctuations have no dependencies in the second moments. However, BENOIT MANDELBROT (1963) already showed that financial market data have more outliers than would be compatible with the (usually assumed) normal distribution and that there are ‘volatility clusters’: small (large) shocks are again followed by small (large) shocks. This may lead to ‘leptokurtic distributions‘, which – as compared to a normal distribution – exhibit more mass at the centre and at the tails of the distribution. This results in ‘excess kurtosis’, i.e. the values of the kurtosis are above three. Keywords: Conditional Variance; Conditional Correlation; Leverage Effect; Arch Effect; Excess Kurtosis (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-642-33436-8_8 Ordering information: This item can be ordered from DOI: 10.1007/978-3-642-33436-8_8 Access Statistics for this chapter More chapters in Springer Texts in Business and Economics from Springer |
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