A Long Memory Model with Normal Mixture GARCH |
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Authors: | Yin-Wong Cheung Sang-Kuck Chung |
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Affiliation: | (1) Real Estate and Housing, Department of Marketing and Consumer Studies, College of Management and Economics, University of Guelph, Guelph, ON, N1G 2W1, Canada;(2) Department of Economics, Finance, and Decision Sciences, School of Business Administration, University of North Carolina at Pembroke, One University Drive, PO. Box 1510, Pembroke, NC 28372-1510, USA |
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Abstract: | We present an exploratory analysis of a class of long memory models with a normal mixture generalized autoregressive conditional
heteroskedasticity innovation process. Monte Carlo results are used to infer the performance of the maximum likelihood estimator.
The estimation biases are associated with, amongst others, the mixing parameter, and these biases are usually insignificant.
As an illustration, we fit the proposed model to four countries inflation data. It is found that the performance of the long
memory model with normal mixture generalized autoregressive conditional heteroskedasticity is better than, say, both autoregressive
moving average and long memory models with a standard generalized autoregressive conditional heteroskedasticity specification
in terms of the flexibility to describe both the time-varying conditional skewness and kurtosis. |
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Keywords: | |
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