Are One Factor Logarithmic Volatility Models Useful to Fit the Features of Financial Data? An Application to Microsoft Data

Helena Veiga

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: This paper provides empirical evidence that continuous time models with one factor of volatility, in some conditions, are able to fit the main characteristics of financial data. It also reports the importance of the feedback factor in capturing the strong volatility clustering of data, caused by a possible change in the pattern of volatility in the last part of the sample. We use the Efficient Method of Moments (EMM) by Gallant and Tauchen (1996) to estimate logarithmic models with one and two stochastic volatility factors (with and without feedback) and to select among them.

Keywords: Efficient Method of Moments; One (Two) Factor Volatility Logarithmic Model; Mean-Reversion; Persistent Volatility; Feedback; Projection; Seminonparametric (SNP); Reprojection. (search for similar items in EconPapers)
JEL-codes: C14 C52 C53 G13 (search for similar items in EconPapers)
Pages: 29
Date: 2003-09-21
New Economics Papers: this item is included in nep-cfn, nep-ets, nep-fin, nep-fmk and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:585.03

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