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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 662:
Stylized Facts of Return Series, Robust Estimates, and Three Popular Models of Volatility

Timo Teräsvirta () and Zhenfang Zhao ()

Abstract: Financial return series of sufficiently high frequency display stylized facts such as volatility clustering, high kurtosis, low starting and slow-decaying autocorrelation function of squared returns and the so-called Taylor effect. In order to evaluate the capacity of volatility models to reproduce these facts, we apply both standard and robust measures of kurtosis and autocorrelation of squares to first-order GARCH, EGARCH and ARSV models. Robust measures provide a fresh view of stylized facts which is useful because many financial time series can be viewed as being contaminated with outliers.

Keywords: GARCH; EGARCH; ARSV; extreme observations; autocorrelation function; kurtosis; robust measure; confidence region.; (follow links to similar papers)

JEL-Codes: C22; C52; (follow links to similar papers)

51 pages, June 1, 2007, Revised August 1, 2007

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This paper is published as:
Teräsvirta, Timo and Zhenfang Zhao, (2011), 'Stylized Facts of Return Series, Robust Estimates, and Three Popular Models of Volatility', Applied Financial Economics, Vol. 21, pages 67-94



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