Contemporaneous-Threshold Smooth Transition GARCH Models

Michael Dueker, Zacharias Psaradakis, Martin Sola and Fabio Spagnolo

Department of Economics Working Papers from Universidad Torcuato Di Tella

Abstract: This paper proposes a contemporaneous-threshold smooth transition GARCH (or CSTGARCH) model for dynamic conditional heteroskedasticity. The C-STGARCH model is a generalization to second conditional moments of the contemporaneous smooth transition threshold autoregressive model of Dueker et al. (2007), in which the regime weights depend on the ex ante probability that a contemporaneous latent regime-specific variable exceeds a threshold value. A key feature of the C-STGARCH model is that its transition function depends on all the parameters of the model as well as on the data. These characteristics allow the model to account for the large persistence and regime shifts that are often observed in the conditional second moments of economic and financial time series.

Keywords: Conditional heteroskedasticity; Smooth transition GARCH; Threshold; Stock returns. (search for similar items in EconPapers)
JEL-codes: C22 E31 G12 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2009-06
New Economics Papers: this item is included in nep-ecm and nep-ets
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https://www.utdt.edu/download.php?fname=_125201432533831800.pdf (application/pdf)

Related works:
Journal Article: Contemporaneous-Threshold Smooth Transition GARCH Models (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:udt:wpecon:2009-06

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