Scandinavian Working Papers in Economics
SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics
No 199: Statistical Properties of the Asymmetric Power ARCH Process
Changli He () and Timo Teräsvirta ()
Additional contact information
Changli He: Dept. of Economic Statistics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden
Timo Teräsvirta: Dept. of Economic Statistics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden
Abstract: The asymmetric power ARCH model is a recent addition to time series models that may be used for predicting volatility. Its performance is compared with that of standard models of conditional heteroskedasticity such as GARCH. This has previously been done empirically. In this paper the same issue is studied theoretically using unconditional fractional moments for the A-PARCH model that are derived for the purpose. The role of the heteroskedasticity parameter of the A-PARCH process is highlighted and compared with corresponding empirical results involving autocorrelation functions of power-transformed absolute-valued return series.
Keywords: GARCH; heteroskedasticity; financial time series; nonlinearity; S&P 500; volatility; time series
JEL-codes: C22
21 pages, First version: September 26, 1997. Revised: September 30, 1997.
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