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Faculty of Economics

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Koo, B., and Linton, O.

Let's get lade: robust estimation of semiparametric multiplicative volatility models

Econometric Theory

Abstract: We investigate a model in which we connect slowly time varying unconditional long-run volatility with short-run conditional volatility whose representation is given as a semi-strong GARCH(1,1) process with heavy tailed errors. We focus on robust estimation of both long-run and short-run volatilities. Our estimation is semiparametric since the long-run volatility is totally unspecified whereas the short-run conditional volatility is a parametric semi-strong GARCH(1,1) process. We propose different robust estimation methods for nonstationary and strictly stationary GARCH parameters with nonparametric long-run volatility function. Our estimation is based on a two-step LAD procedure. We establish the relevant asymptotic theory of the proposed estimators. Numerical results lend support to our theoretical results.

Author links: Oliver Linton  

Publisher's Link: http://tf5lu9ym5n.search.serialssolutions.com/?ctx_ver=Z39.88-2004&ctx_enc=info%3Aofi%2Fenc%3AUTF-8&rfr_id=info:sid/summon.serialssolutions.com&rft_val_fmt=info:ofi/fmt:kev:mtx:journal&rft.genre=article&rft.atitle=LET%E2%80%99S+GET+LADE%3A+ROBUST+ESTIMATION+OF+SEMIPARAMETRIC+MULTIPLICATIVE+VOLATILITY+MODELS&rft.jtitle=Econometric+Theory&rft.au=Koo%2C+Bonsoo&rft.au=Linton%2C+Oliver&rft.date=2015-08-01&rft.issn=0266-4666&rft.eissn=1469-4360&rft.volume=31&rft.issue=4&rft.spage=671&rft.epage=702&rft_id=info:doi/10.1017%2FS0266466614000516&rft.externalDBID=n%2Fa&rft.externalDocID=10_1017_S0266466614000516¶mdict=en-US



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