4,504 research outputs found

    Detecting level shifts in the presence of conditional heteroscedasticity.

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    The objective of this paper is to analyze the finite sample performance of two variants of the likelihood ratio test for detecting a level shift in uncorrelated conditionally heteroscedastic time series. We show that the behavior of the likelihood ratio test is not appropriate in this context whereas if the test statistic is appropriately standardized, it works better. We also compare two alternative procedures for testing for several level shifts. The results are illustrated by analyzing daily returns of exchange rates

    Is stochastic volatility more flexible than garch?

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    This paper compares the ability of GARCH and ARSV models to represent adequately the main empirical properties usually observed in high frequency financial time series: high kurtosis, small first order autocorrelation of squared observations and slow decay towards zero of the autocorrelation coefficients of squared observations. We show that the ARSV(1) model is more flexible than the GARCH(1,1) model in the sense that it is able to generate series with higher kurtosis and smaller first order autocorrelation of squares for a wider variety of parameter specifications. Our results may help to clarify some puzzles raised in the empirical analysis of real financial time series

    On the nitrogen abundance of FLIERs: the outer knots of the planetary nebula NGC 7009

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    We have constructed a 3D photoionisation model of a planetary nebula (PN) similar in structure to NGC 7009 with its outer pair of knots (also known as FLIERs --fast, low-ionization emission regions). The work is motivated by the fact that the strong [N II]6583A line emission from FLIERs in many planetary nebulae has been attributed to a significant local overabundance of nitrogen. We explore the possibility that the apparent enhanced nitrogen abundance previously reported in the FLIERs may be due to ionization effects. Our model is indeed able to reproduce the main spectroscopic and imaging characteristics of NGC 7009's bright inner rim and its outer pairs of knots, assuming homogeneous elemental abundances throughout the nebula, for nitrogen as well as all the other elements included in the model. Because of the fact that the (N+/N)/(O+/O) ratio predicted by our models are 0.60 for the rim and 0.72 for the knots, so clearly in disagreement with the N+/N=O+/O assumption of the ionization correction factors method (icf), the icfs will be underestimated by the empirical scheme, in both components, rim and knots, but more so in the knots. This effect is partly responsible for the apparent inhomogeneous N abundance empirically derived. The differences in the above ratio in these two components of the nebula may be due to a number of effects including charge exchange --as pointed out previously by other authors-- and the difference in the ionization potentials of the relevant species --which makes this ratio extremely sensitive to the shape of the local radiation field. Because of the latter, a realistic density distribution is essential to the modelling of a non-spherical object, if useful information is to be extracted from spatially resolved observations, as in the case of NGC 7009.Comment: 12 pages including 8 tables and 2 figures. MNRAS in pres

    Estimating and Forecasting GARCH Volatility in the Presence of Outiers

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    The main goal when fitting GARCH models to conditionally heteroscedastic time series is to estimate the underlying volatilities. It is well known that outliers affect the estimation of the GARCH parameters. However, little is known about their effects when estimating volatilities. In this paper, we show that when estimating the volatility by using Maximum Likelihood estimates of the parameters, the biases incurred can be very large even if estimated parameters have small biases. Consequently, we propose to use robust procedures. In particular, a simple robust estimator of the parameters is proposed and shown that its properties are comparable with other more complicated ones available in the literature. The properties of the estimated and predicted volatilities obtained by using robust filters based on robust parameter estimates are analyzed. All the results are illustrated using daily S&P500 and IBEX35 returns.Heteroscedasticity, M-estimator, QML estimator, Robustness, Financial Markets

    Rental Housing Discrimination and the Persistence of Ethnic Enclaves

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    We conduct a field experiment to show that discrimination in the rental market represents a significant obstacle for the geographical assimilation process by immigrants. We employ the Internet platform to identify vacant rental apartments in different areas of the two largest Spanish cities, Madrid and Barcelona. We send emails showing interest in the apartments and signal the applicants' ethnicity by using native and foreign-sounding names. We find that, in line with previous studies, immigrants face a differential treatment when trying to rent an apartment. Our results also indicate that this negative treatment varies considerably with the concentration of immigrants in the area. In neighborhoods with a low presence of immigrants the response rate is 30 percentage points lower for immigrants than for natives, while this differential disappears when the immigration share reaches 50%. We conclude that discriminatory practices in the rental housing market contribute to perpetuate the ethnic spatial segregation observed in large cities.immigration, discrimination, spatial segregation

    DETECTING LEVEL SHIFTS IN THE PRESENCE OF CONDITIONAL HETEROSCEDASTICITY

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    The objective of this paper is to analyze the finite sample performance of two variants of the likelihood ratio test for detecting a level shift in uncorrelated conditionally heteroscedastic time series. We show that the behavior of the likelihood ratio test is not appropriate in this context whereas if the test statistic is appropriately standardized, it works better. We also compare two alternative procedures for testing for several level shifts. The results are illustrated by analyzing daily returns of exchange rates.EGARCH, GARCH, Likelihood Ratio, Stochastic Volatility.

    SPURIOUS AND HIDDEN VOLATILITY

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    This paper analyzes the effects caused by outliers on the identification and estimation of GARCH models. We show that outliers can lead to detect spurious conditional heteroscedasticity and can also hide genuine ARCH effects. First, we derive the asymptotic biases caused by outliers on the sample autocorrelations of squared observations and their effects on some homoscedasticity tests. Then, we obtain the asymptotic biases of the OLS estimates of ARCH(p) models and analyze their finite sample behaviour by means of extensive Monte Carlo experiments. The finite sample results are extended to GLS and ML estimates ARCH(p) and GARCH(1,1) models.GARCH, Outliers, Heteroscedasticity
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