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On Periodic Autogressive Conditional Heteroskedasticity

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  • Tim Bollerslev
  • Eric Ghysels

Abstract

Asset returns exhibit clustering of volatility throughout the year. This paper proposes a class of models featuring periodicity in conditional heteroskedasticity. The periodic structures in GARCH models share many properties with periodic ARMA processes studied by Gladyshev (1961), Tiao and Grupe (1980) and others. We describe the relation between periodic GARCH processes and time-invariant (seasonal) GARCH processes. Besides the periodic GARCH or P-GARCH process, we also discuss P-IGARCH, PI-GARCH, P-ARCH-M and P-EGARCH processes. Extensions to multivariate ARCH processes are studied as well. Moreover, we also consider periodicity in the common persistence of volatility for several series. A quasi-maximum likelihood estimator following Bollerslev and Wooldridge (1992) is defined and a LM test for periodicity derived from it. The models are applied to several asset pricing series. Dans cette étude, nous proposons une classe de processus ARCH périodiques. Cette structure est semblable à celle des processus linéaires périodiques. Les procésus P-ARCH partagent beaucoup de similarités avec les processus périodiques linéaires0501s ont aussi, à cause des non linéarités, des caractéristiques spécifiques. Nous étudions de façon analytique les pertes d'efficacité en terme de prévisions dues à des erreurs de spécifications lorsque les données suivent un processus P-ARCH et qu'un modèle ARCG (saisonnier) est estimé. Le papier inclut également une étude de Monte Carlo qui complémente les résultats théoriques et une appliction au taux de change DM - livre Sterling. Plusieurs extensions, telles que P-EGARCH et P-IGARCH, sont aussi proposées.

Suggested Citation

  • Tim Bollerslev & Eric Ghysels, 1994. "On Periodic Autogressive Conditional Heteroskedasticity," CIRANO Working Papers 94s-03, CIRANO.
    • Handle: RePEc:cir:cirwor:94s-03
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    References listed on IDEAS

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    Cited by:

    1. Maher Asal, 2012. "Has the Euro Boosted Equity Markets in the Euro Area?," Journal of Business Administration Research, Journal of Business Administration Research, Sciedu Press, vol. 1(2), pages 51-70, October.

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    More about this item

    Keywords

    Volatility clustering; Seasonality; Periodic structures; ARCH; GARCH; P GARCH; Exchange rates; Persistance dans la volatilité ; Structures périodiques ; Taux de change;
    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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