A Local Instrumental Variable Estimation Method For Generalized Additive Volatility Models

Woocheol Kim and Oliver Linton

FMG Discussion Papers from Financial Markets Group

Abstract: We investigate a new separable nonparametric model for time series, which includes many ARCH models and AR models already discussed in the literature. We also propose a new estimation procedure called LIVE, or local instrumental variable estimation, that is based on a localization of the classical instrumental variable method. Our method has considerable computational advantages over the competing marginal integration or projection method. We also consider a more efficient two-step likelihood-based procedure, and show that this yields both asymptotic and finite sample performance gains.

Date: 2004-09
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Related works:
Working Paper: A local instrumental variable estimation method for generalized additive volatility models (2004)
Working Paper: A Local Instrumental Variable Estimation Method for Generalized Additive Volatility Models (2003)
Working Paper: A local instrumental variable estimation method for generalized additive volatility models (2003)
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