Improving the accuracy of bubble date estimators under time-varying volatility

Eiji Kurozumi and Anton Skrobotov

Papers from arXiv.org

Abstract: In this study, we consider a four-regime bubble model under the assumption of time-varying volatility and propose the algorithm of estimating the break dates with volatility correction: First, we estimate the emerging date of the explosive bubble, its collapsing date, and the recovering date to the normal market under assumption of homoskedasticity; second, we collect the residuals and then employ the WLS-based estimation of the bubble dates. We demonstrate by Monte Carlo simulations that the accuracy of the break dates estimators improve significantly by this two-step procedure in some cases compared to those based on the OLS method.

Date: 2023-06
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-mfd
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2306.02977

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