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Threshold arch models and asymmetries in volatility
Author(s) -
Rabemananjara R.,
Zakoian J. M.
Publication year - 1993
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.3950080104
Subject(s) - heteroscedasticity , generality , econometrics , volatility (finance) , economics , arch , autoregressive conditional heteroskedasticity , stock (firearms) , conditional variance , empirical evidence , mechanical engineering , philosophy , civil engineering , management , epistemology , engineering
This paper attempts to enlarge the class of Threshold Heteroscedastic Models (TARCH) introduced by Zakoían (1991a). We show that it is possible to relax the positivity constraints on the parameters of the conditional variance. Unconstrained models provide a greater generality of the paths allowing for nonlinearities in the volatility. Cyclical behaviour is permitted as well as different relative impacts of positive and negative shocks on volatility, depending on their size. We give empirical evidence using French stock returns.