IDEAS home Printed from https://ideas.repec.org/a/wly/apsmbi/v36y2020i4p570-585.html
   My bibliography  Save this article

Birnbaum‐Saunders autoregressive conditional range model applied to stock index data

Author

Listed:
  • Jeremias Leão
  • Erico Lopes
  • Themis Leão
  • Diego C. Nascimento

Abstract

This article proposes a new approach to the conditional autoregressive range (CARR) model using the Birnbaum‐Saunders (BS) distribution. The model aims to develop volatility clustering, which incorporates extreme fluctuations, using a time‐varying evolution of the range process called the BSCARR model. Furthermore, diagnosis analysis tools for diagnosis analysis were developed to evaluate the goodness of fit, such as residual analysis, global influence measures based on Cook's distance, and local influence analysis. For illustrative purposes, three real financial market indices are analyzed. A comparison with classical CARR models was also carried out in these examples. The results indicated that the proposed model outperformed some existing models in the literature, especially a recent CARR model based on the gamma distribution even under the presence of atypical cases (observed values).

Suggested Citation

  • Jeremias Leão & Erico Lopes & Themis Leão & Diego C. Nascimento, 2020. "Birnbaum‐Saunders autoregressive conditional range model applied to stock index data," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 36(4), pages 570-585, July.
    • Handle: RePEc:wly:apsmbi:v:36:y:2020:i:4:p:570-585
    DOI: 10.1002/asmb.2511
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/asmb.2511
    Download Restriction: no
    File URL: https://libkey.io/10.1002/asmb.2511?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
    2. Weymark, Diana N, 1998. "A General Approach to Measuring Exchange Market Pressure," Oxford Economic Papers, Oxford University Press, vol. 50(1), pages 106-121, January.
    3. Robert F. Engle & Jeffrey R. Russell, 1998. "Autoregressive Conditional Duration: A New Model for Irregularly Spaced Transaction Data," Econometrica, Econometric Society, vol. 66(5), pages 1127-1162, September.
    4. Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
    5. Satchell, Stephen & Knight, John, 2007. "Forecasting Volatility in the Financial Markets," Elsevier Monographs, Elsevier, edition 3, number 9780750669429.
    6. Benoit Mandelbrot, 2015. "The Variation of Certain Speculative Prices," World Scientific Book Chapters, in: Anastasios G Malliaris & William T Ziemba (ed.), THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 3, pages 39-78, World Scientific Publishing Co. Pte. Ltd..
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cristina Amado & Annastiina Silvennoinen & Timo Teräsvirta, 2018. "Models with Multiplicative Decomposition of Conditional Variances and Correlations," CREATES Research Papers 2018-14, Department of Economics and Business Economics, Aarhus University.
    2. Committee, Nobel Prize, 2003. "Time-series Econometrics: Cointegration and Autoregressive Conditional Heteroskedasticity," Nobel Prize in Economics documents 2003-1, Nobel Prize Committee.
    3. Francis X. Diebold, 2004. "The Nobel Memorial Prize for Robert F. Engle," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(2), pages 165-185, June.
    4. Kalev, Petko S. & Liu, Wai-Man & Pham, Peter K. & Jarnecic, Elvis, 2004. "Public information arrival and volatility of intraday stock returns," Journal of Banking & Finance, Elsevier, vol. 28(6), pages 1441-1467, June.
    5. Stanley, H.E. & Gopikrishnan, P. & Plerou, V. & Amaral, L.A.N., 2000. "Quantifying fluctuations in economic systems by adapting methods of statistical physics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 287(3), pages 339-361.
    6. De Bandt, Olivier & Hartmann, Philipp, 2000. "Systemic risk: A survey," Working Paper Series 35, European Central Bank.
    7. Bollerslev, Tim, 2001. "Financial econometrics: Past developments and future challenges," Journal of Econometrics, Elsevier, vol. 100(1), pages 41-51, January.
    8. Victor Pontines & Reza Siregar, 2006. "Exchange Market Intervention and Evidence of Post-Crisis Flexible Exchange Rate Regimes in Selected East Asian Economies," Centre for International Economic Studies Working Papers 2006-01, University of Adelaide, Centre for International Economic Studies.
    9. Kovačić, Zlatko, 2007. "Forecasting volatility: Evidence from the Macedonian stock exchange," MPRA Paper 5319, University Library of Munich, Germany.
    10. Detlef Seese & Christof Weinhardt & Frank Schlottmann (ed.), 2008. "Handbook on Information Technology in Finance," International Handbooks on Information Systems, Springer, number 978-3-540-49487-4, November.
    11. Pontines, Victor & Siregar, Reza, 2009. "Intervention index and exchange rate regimes: the cases of selected East-Asian economies," MPRA Paper 17138, University Library of Munich, Germany.
    12. Alagidede, Paul & Panagiotidis, Theodore, 2009. "Modelling stock returns in Africa's emerging equity markets," International Review of Financial Analysis, Elsevier, vol. 18(1-2), pages 1-11, March.
    13. Koutmos, Dimitrios, 2012. "An intertemporal capital asset pricing model with heterogeneous expectations," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(5), pages 1176-1187.
    14. Pierre Perron & Eduardo Zorita & Wen Cao & Clifford Hurvich & Philippe Soulier, 2017. "Drift in Transaction-Level Asset Price Models," Journal of Time Series Analysis, Wiley Blackwell, vol. 38(5), pages 769-790, September.
    15. de Lima, Pedro J. F., 1997. "On the robustness of nonlinearity tests to moment condition failure," Journal of Econometrics, Elsevier, vol. 76(1-2), pages 251-280.
    16. Eleni Constantinou & Robert Georgiades & Avo Kazandjian & George Kouretas, 2005. "Mean and variance causality between the Cyprus Stock Exchange and major equity markets," Working Papers 0501, University of Crete, Department of Economics.
    17. Bauer, Rob M M J & Nieuwland, Frederick G M C & Verschoor, Willem F C, 1994. "German Stock Market Dynamics," Empirical Economics, Springer, vol. 19(3), pages 397-418.
    18. McMillan, David G. & Speight, Alan E. H., 2001. "Non-ferrous metals price volatility: a component analysis," Resources Policy, Elsevier, vol. 27(3), pages 199-207, September.
    19. Estrada, Javier, 1995. "Empirical evidence on the impact of European insider trading regulations," DEE - Working Papers. Business Economics. WB 7068, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    20. Frank J. Fabozzi & Radu Tunaru & Tony Wu, 2004. "Modeling Volatility for the Chinese Equity Markets," Annals of Economics and Finance, Society for AEF, vol. 5(1), pages 79-92, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:apsmbi:v:36:y:2020:i:4:p:570-585. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1002/(ISSN)1526-4025 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.