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LIKELIHOOD-BASED ESTIMATION OF LATENT GENERALISED ARCH STRUCTURES

Gabriele Fiorentini (), Enrique Sentana () and Neil Shephard ()

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: GARCH models are commonly used as latent processes in econometrics, financial economics and macroeconomics. Yet no exact likelihood analysis of these models has been provided so far. In this paper we outline the issues and suggest a Markov chain Monte Carlo algorithm which allows the calculation of a classical estimator via the simulated EM algorithm or a Bayesian solution in O(T) computational operations, where T denotes the sample size. We assess the performance of our proposed algorithm in the context of both artificial examples and an empirical application to 26 UK sectorial stock returns, and compare it to existing approximate solutions.

Keywords: Bayesian inference; Dynamic Heteroskedasticity; Factor models (search for similar items in EconPapers)
Date: 2003-02
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http://www.ivie.es/downloads/docs/wpasad/wpasad-2003-06.pdf Fisrt version / Primera version, 2003 (application/pdf)

Related works:
Journal Article: Likelihood-Based Estimation of Latent Generalized ARCH Structures (2004) Downloads
Working Paper: Likelihood-based estimation of latent generalised ARCH structures (2004) Downloads
Working Paper: Likelihood-based estimation of latent generalised ARCH structures (2003) Downloads
Working Paper: Likelihood-based estimation of latent generalised ARCH structures (2003) Downloads
Working Paper: Likelihood-Based Estimation of Latent Generalised ARCH Structures (2002) Downloads
Working Paper: Likelihood-based estimation of latent generalised ARCH structures (2002) Downloads
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