Quasi score-driven models

F. Blasques, Christian Francq and Sébastien Laurent
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F. Blasques: VU University Medical Center [Amsterdam]

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Abstract: This paper introduces the class of quasi score-driven (QSD) models. This new class inherits and extends the basic ideas behind the development of score-driven (SD) models and addresses a number of unsolved issues in the score literature. In particular, the new class of models (i) generalizes many existing models, including SD models, (ii) disconnects the updating equation from the log-likelihood implied by the conditional density of the observations, (iii) allows testing of the assumptions behind SD models that link the updating equation of the conditional moment to the conditional density, (iv) allows QML estimation of SD models, (v) and allows explanatory variables to enter the updating equation. We establish the asymptotic properties of the QLE, QMLE and MLE of the proposed QSD model as well as the likelihood ratio and Lagrange multiplier test statistics. The finite sample properties are studied by means of an extensive Monte Carlo study. Finally, we show the empirical relevance of QSD models to estimate the conditional variance of 400 US stocks.

Keywords: Score-driven models; GARCH; Fat-tails; Asymmetry; QLE; QMLE (search for similar items in EconPapers)
Date: 2023-05
New Economics Papers: this item is included in nep-ecm
Note: View the original document on HAL open archive server: https://amu.hal.science/hal-04069143v1
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Citations: View citations in EconPapers (10)

Published in Journal of Econometrics, 2023, 234 (1), pp.251-275. ⟨10.1016/j.jeconom.2021.12.005⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04069143

DOI: 10.1016/j.jeconom.2021.12.005

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