Are feedback factors important in modelling financial data?

Helena Veiga

DES - Working Papers. Statistics and Econometrics. WS from Universidad Carlos III de Madrid. Departamento de Estadística

Abstract: This paper provides empirical evidence that continuous time models with one factor of volatility are, in some circumstances, able to fit the main characteristics of financial data and reports insights about the importance of introducing feedback factors for capturing the strong persistence caused by the presence of changes in the variance. We use the Efficient Method of Moments (EMM) by Gallant and Tauchen (1996) to estimate and to select among logarithmic models with one and two stochastic volatility factors (with and without feedback).

Date: 2006-01
New Economics Papers: this item is included in nep-ets and nep-fmk
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Journal Article: Are Feedback Factors Important in Modeling Financial Data? (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:wsrepe:ws060101

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