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Re-examining the sources of heteroskedasticity: The paradigm of noisy chaotic models

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  • Kyrtsou, Catherine

Abstract

In this paper, we analyze the rich dynamic properties of the noisy chaotic model developed by Kyrtsou [C. Kyrtsou, Evidence for neglected linearity in noisy chaotic models, International Journal of Bifurcation and Chaos 15 (10) (2005)] considering homoskedastic errors, with the aim of deriving information about possible links between noisy chaotic dynamics and ARCH effects. With the joint application of the Engle [R.F. Engle, Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflation, Econometrica 50 (1982) 987–1007] and McLeod–Li [A.I. McLeod, W.K. Li, Diagnostic checking ARMA time series models using squared-residuals autocorrelations, Journal of Time Series Analysis 4 (1983) 269–273] tests for non-linearity in the second moment, we attempt to show how highly non-linear models can exhibit heteroskedasticity when no heteroskedastic structure is assumed by construction.

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  • Kyrtsou, Catherine, 2008. "Re-examining the sources of heteroskedasticity: The paradigm of noisy chaotic models," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(27), pages 6785-6789.
    • Handle: RePEc:eee:phsmap:v:387:y:2008:i:27:p:6785-6789
    DOI: 10.1016/j.physa.2008.09.008
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    Cited by:

    1. Maria Grydaki & Stilianos Fountas, 2010. "What Explains Nominal Exchange Rate Volatility? Evidence from the Latin American Countries," Discussion Paper Series 2010_10, Department of Economics, University of Macedonia, revised Jul 2010.
    2. Wasel Shadat, 2011. "On the Nonparametric Tests of Univariate GARCH Regression Models," Economics Discussion Paper Series 1115, Economics, The University of Manchester.
    3. Malliaris, A.G. & Kyrtsou, C., 2009. "Editorial introduction of the special issue: "Energy sector pricing and macroeconomic dynamics"," Energy Economics, Elsevier, vol. 31(6), pages 825-826, November.
    4. Richard Ashley, 2012. "On the Origins of Conditional Heteroscedasticity in Time Series," Korean Economic Review, Korean Economic Association, vol. 28, pages 5-25.
    5. Kyrtsou, Catherine & Mikropoulou, Christina & Papana, Angeliki, 2016. "Does the S&P500 index lead the crude oil dynamics? A complexity-based approach," Energy Economics, Elsevier, vol. 56(C), pages 239-246.
    6. Rachida Hennani & Michel Terraza, 2015. "Contributions of a noisy chaotic model to the stressed Value-at-Risk," Economics Bulletin, AccessEcon, vol. 35(2), pages 1262-1273.
    7. Maria Grydaki & Stilianos Fountas, 2010. "What Explains Output Volatility? Evidence from the G3," Discussion Paper Series 2010_09, Department of Economics, University of Macedonia, revised Jul 2010.
    8. Rachida Hennani, 2015. "Can the Lasota(1977)’s model compete with the Mackey-Glass(1977)’s model in nonlinear modelling of financial time series?," Working Papers 15-09, LAMETA, Universtiy of Montpellier, revised Jun 2015.
    9. Sadek Melhem & Mahmoud Melhem, 2012. "Comments on “Re-examining the source of Heteroskedasticity: The paradigm of noisy chaotic models”," Working Papers 12-13, LAMETA, Universtiy of Montpellier, revised Apr 2012.

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