A framework for normal mean variance mixture innovations with application to Garth modelling
De Jongh, P.J.
MetadataShow full item record
GARCH models are useful to estimate the volatility of financial return series. Historically the innovation distribution of a GARCH model was assumed to be standard normal but recent research emphasizes the need for more general distributions allowing both asymmetry (skewness) and kurtosis in the innovation distribution to obtain better fitting models. A number of authors have proposed models which are special cases of the class of normal mean variance mixtures. We introduce a general framework within which this class of innovation distributions may be discussed. This entails writing the innovation term as a standardised combination of two variables, namely a normally distributed term and a mixing variable, each with its own interpretation. We list the existing models that fit into this framework and compare the corresponding innovation distributions, finding that they tend to be quite similar. This is confirmed by an empirical illustration which fits the models to the monthly excess returns series of the US stocks. The illustration finds further support for the ICAPM model of Merton, thus supporting recent results of Lanne and Saikonnen (2006)
Showing items related by title, author, creator and subject.
Bt maize and frogs : an investigation into possible adverse effects of Bt toxin exposure to amphibian larvae Zaayman, Jazel Larissa (North-West University, 2012)Genetically modified maize expressing the Bt-protein Cry1Ab (Bt maize) is planted widely in South Africa. Crop residues of Bt maize often end up in aquatic ecosystems where aquatic organisms are exposed to Cry1Ab protein. ...
Zwane, Cynthia; Venter, Chris; Temane, Q. Michael; Chigeza, Shingairai; Zwane, Cynthia; Venter, Chris; Temane, Q. Michael; Chigeza, Shingairai (Taylor & Francis, 2012)This study explores Black adults’ perceptions of factors that contribute to healthy family functioning. Qualitative interviews were conducted with 18 Black participants between the ages of 26 and 54. They responded to a ...
De Jongh, P.J. (AOSIS, 2008)This paper provides an overview of the contributions by prof JH Venter to financial risk and volatility modelling, estimation and forecasting. Venter's research is based on the classical GARCH model which he refines in ...