Asymptotically Optimal Smoothing with ARCH Models / Daniel B. Nelson.

Format:

Book

Author/Creator:

Nelson, Daniel B.

Contributor:

National Bureau of Economic Research.

Series:

Technical Working Paper Series (National Bureau of Economic Research) no. t0161.

NBER technical working paper series no. t0161

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1994.

Summary:

Suppose an observed time series is generated by a stochastic volatility model-i.e., there is an unobservable state variable controlling the volatility of the innovations in the series. As shown by Nelson (1992), and Nelson and Foster (1994), a misspecified ARCH model will often be able to consistently (as a continuous time limit is approached) estimate the unobserved volatility process, using information in the lagged residuals. This paper shows how to more efficiently estimate such a volatility process using information in both lagged and led residuals. In particular, this paper expands the optimal filtering results of Nelson and Foster (1994) and Nelson (1994) to smoothing.

Notes:

Print version record

August 1994.