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Estimation and Inference of Quantile Impulse Response Functions by Local Projections: With Applications to VaR Dynamics

Author

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  • Heejoon Han
  • Whayoung Jung
  • Ji Hyung Lee

Abstract

This article investigates the estimation and inference of quantile impulse response functions. We propose a new estimation method using the idea of local projections by Jordà (2005). We establish consistency and asymptotic normality of the estimator, thereby enabling asymptotic inference. We also consider the confidence interval construction based on the stationary bootstrap and prove its consistency. Confirmatory simulation results and empirical practices on value-at-risk dynamics are provided.

Suggested Citation

  • Heejoon Han & Whayoung Jung & Ji Hyung Lee, 2024. "Estimation and Inference of Quantile Impulse Response Functions by Local Projections: With Applications to VaR Dynamics," Journal of Financial Econometrics, Oxford University Press, vol. 22(1), pages 1-29.
    • Handle: RePEc:oup:jfinec:v:22:y:2024:i:1:p:1-29.
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    File URL: http://hdl.handle.net/10.1093/jjfinec/nbac026
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    More about this item

    Keywords

    local projection; quantile impulse response; stationary bootstrap; value-at-risk;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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