Rolling-sampled parameters of ARCH and Levy-stable models

Stavros Degiannakis, Alexandra Livada and Epaminondas Panas

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper an asymmetric autoregressive conditional heteroskedasticity (ARCH) model and a Levy-stable distribution are applied to some well-known financial indices (DAX30, FTSE20, FTSE100 and SP500), using a rolling sample of constant size, in order to investigate whether the values of the estimated parameters of the models change over time. Although, there are changes in the estimated parameters reflecting that structural properties and trading behaviour alter over time, the ARCH model adequately forecasts the one-day-ahead volatility. A simulation study is run to investigate whether the time variant attitude holds in the case of a generated ARCH data process revealing that even in that case the rolling-sampled parameters are time-varying.

Keywords: ARCH model; GED distribution; Leverage effect; Levy-stable distribution; Rolling sample; Spill over; Value at risk. (search for similar items in EconPapers)
JEL-codes: C32 C52 C53 G15 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (12)

Published in Applied Economics 40.23(2008): pp. 3051-3067

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Journal Article: Rolling-sampled parameters of ARCH and Levy-stable models (2008)
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