A One Line Derivation of EGARCH

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dc.contributor.authorMcAleer, M.
dc.contributor.authorHafner, C. M.
dc.date.accessioned2015-01-26T22:13:29Z
dc.date.available2015-01-26T22:13:29Z
dc.date.issued2014en
dc.description.abstractOne of the most popular univariate asymmetric conditional volatility models is the exponential GARCH (or EGARCH) specification. In addition to asymmetry, which captures the different effects on conditional volatility of positive and negative effects of equal magnitude, EGARCH can also accommodate leverage, which is the negative correlation between returns shocks and subsequent shocks to volatility. However, there are as yet no statistical properties available for the (quasi-) maximum likelihood estimator of the EGARCH parameters. It is often argued heuristically that the reason for the lack of statistical properties arises from the presence in the model of an absolute value of a function of the parameters, which does not permit analytical derivatives or the derivation of statistical properties. It is shown in this paper that: (i) the EGARCH model can be derived from a random coefficient complex nonlinear moving average (RCCNMA) process; and (ii) the reason for the lack of statistical properties of the estimators of EGARCH is that the stationarity and invertibility conditions for the RCCNMA process are not known.en
dc.identifier.citationMcAleer, M., Hafner, C. M. (2014) A One Line Derivation of EGARCH. University of Canterbury. 6pp..en
dc.identifier.urihttp://hdl.handle.net/10092/10078
dc.language.isoen
dc.publisherUniversity of Canterbury. Department of Economics and Financeen
dc.rights.urihttps://hdl.handle.net/10092/17651en
dc.subjectleverageen
dc.subjectasymmetryen
dc.subjectexistenceen
dc.subjectrandom coefficient modelsen
dc.subjectcomplex nonlinear moving average processen
dc.subject.anzsrcFields of Research::35 - Commerce, management, tourism and services::3502 - Banking, finance and investment::350203 - Financial econometricsen
dc.subject.anzsrcFields of Research::35 - Commerce, management, tourism and services::3502 - Banking, finance and investment::350208 - Investment and risk managementen
dc.titleA One Line Derivation of EGARCHen
dc.typeDiscussion / Working Papers
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