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AUTOREGRESSIVE CONDITIONAL VOLATILITY, SKEWNESS AND KURTOSIS

Ángel León (), Gonzalo Rubio and Gregorio Serna
Additional contact information
Ángel León: Universidad de Alicante
Gonzalo Rubio: Universidad del País Vasco
Gregorio Serna: Universidad de Castilla-La Mancha

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

Abstract: This paper proposes a GARCH-type model allowing for time-varying volatility, skewness and kurtosis. The model is estimated assuming a Gram-Charlier series expansion of the normal density function for the error term, which is easier to estimate than the non-central t distribution proposed by Harvey and Siddique (1999). Moreover, this approach accounts for time-varying skewness and kurtosis while the approach by Harvey and Siddique (1999) only accounts for nonnormal skewness. We apply this method to daily returns of a variety of stock indices and exchange rates. Our results indicate a significant presence of conditional skewness and kurtosis. It is also found that specifications allowing for time-varying skewness and kurtosis outperform specifications with constant third and fourth moments.

Keywords: Conditional volatility, skewness and kurtosis; Gram-Charlier series expansion; Stock indices. (search for similar items in EconPapers)
JEL-codes: C13 C14 G12 G13 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2004-03
New Economics Papers: this item is included in nep-ets, nep-fin, nep-fmk, nep-ifn and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2004-13

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