In this work we investigate the impact of misspecification of the innovations in fitting Garch(1, 1) models. We show that an incorrect specification of the innovations together with the reduction of the parameter space to the weak stationarity region, can give rise to a spurious IGARCH effect. We address this point through an extensive Monte Carlo simulation study. We also analyze the impact of misspecification on forecasted volatilities, showing that innovations with light tails can lead to a remarkable overestimate of volatilities.

Bellini, F., & Bottolo, L. (2009). Misspecification and domain issues in fitting Garch(1,1) models. COMMUNICATIONS IN STATISTICS. SIMULATION AND COMPUTATION, 38(1), 31-45 [10.1080/03610910802395653].

Misspecification and domain issues in fitting Garch(1,1) models

BELLINI, FABIO;
2009

Abstract

In this work we investigate the impact of misspecification of the innovations in fitting Garch(1, 1) models. We show that an incorrect specification of the innovations together with the reduction of the parameter space to the weak stationarity region, can give rise to a spurious IGARCH effect. We address this point through an extensive Monte Carlo simulation study. We also analyze the impact of misspecification on forecasted volatilities, showing that innovations with light tails can lead to a remarkable overestimate of volatilities.
Articolo in rivista - Articolo scientifico
Innovation distribution, IGarch effect, Monte Carlo simulations, weak and strong stationarity, volatility forecasting
English
31
45
http://hdl.handle.net/10281/3162
Bellini, F., & Bottolo, L. (2009). Misspecification and domain issues in fitting Garch(1,1) models. COMMUNICATIONS IN STATISTICS. SIMULATION AND COMPUTATION, 38(1), 31-45 [10.1080/03610910802395653].
Bellini, F; Bottolo, L
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/6252
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