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A non-stationary approach for financial returns with nonparametric heteroscedasticity

[working paper]

Gürtler, Marc; Kreiss, Jens-Peter; Rauh, Ronald

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Please use the following Persistent Identifier (PID) to cite this document:http://hdl.handle.net/10419/55240

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Corporate Editor Technische Universität Braunschweig, Department Wirtschaftswissenschaften, Institut für Finanzwirtschaft
Abstract "A non-stationary regression model for financial returns is examined theoretically in this paper. Volatility dynamics are modelled both exogenously and deterministic, captured by a nonparametric curve estimation on equidistant centered returns. We prove consistency and asymptotic normality of a symmetric variance estimator and of a one-sided variance estimator analytically, and derive remarks on the bandwidth decision. Further attention is paid to asymmetry and heavy tails of the return distribution, implemented by an asymmetric version of the Pearson type VII distribution for random innovations. By providing a method of moments for its parameter estimation and a connection to the Student-t distribution we offer the framework for a factor-based VaR approach. The approximation quality of the non-stationary model is supported by simulation studies." (author's abstract)
Keywords financial market; return; regression; distribution; distribution of profits
Classification Methods and Techniques of Data Collection and Data Analysis, Statistical Methods, Computer Methods; Economic Policy
Document language English
Publication Year 2009
City Braunschweig
Page/Pages 33 p.
Series IF Working Paper Series, IF31V2
Licence Deposit Licence - No Redistribution, No Modifications
data provider This metadata entry was indexed by the Special Subject Collection Social Sciences, USB Cologne