Likelihood-Related Estimation Methods and Non-Gaussian GARCH Processes

Christophe Chorro (), Dominique Guegan () and Florian Ielpo
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Christophe Chorro: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Dominique Guegan: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: This article discusses the finite distance properties of three likelihood-based estimation strategies for GARCH processes with non-Gaussian conditional distributions: (1) the maximum likelihood approach; (2) the Quasi maximum Likelihood approach; (3) a multi-steps recursive estimation approach (REC). We first run a Monte Carlo test which shows that the recursive method may be the most relevant approach for estimation purposes. We then turn to a sample of SP500 returns. We confirm that the REC estimates are statistically dominating the parameters estimated by the two other competing methods. Regardless of the selected model, REC estimates deliver the more stable results.

Keywords: Maximum likelihood method; related-GARCH process; recursive estimation method; mixture of Gaussian distribution; Generalized Hyperbolic distributions; SP500; Maximum de vraisemblance; Processus GARCH; méthode d'estimation récursive; mixtures de gaussiennes; distributions hyperbolique Généralisée (search for similar items in EconPapers)
Date: 2010-07
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00523371v1
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Citations: View citations in EconPapers (2)

Published in 2010

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Working Paper: Likelihood-Related Estimation Methods and Non-Gaussian GARCH Processes (2010)
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