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A discussion on the innovation distribution of the Markov regime-switching GARCH model

Shi, Yanlin; Feng, Lingbing

Description

The Markov Regime-Switching Generalized autoregressive conditional heteroskedastic (MRS-GARCH) model is a widely used approach to model the financial volatility with potential structural breaks. The original innovation of the MRS-GARCH model is assumed to follow the Normal distribution, which cannot accommodate fat-tailed properties commonly existing in financial time series. Many existing studies point out that this problem can lead to inconsistent estimates. To overcome it, the Student's...[Show more]

CollectionsANU Research Publications
Date published: 2016
Type: Journal article
URI: http://hdl.handle.net/1885/103514
Source: Economic Modelling
DOI: 10.1016/j.econmod.2015.11.018

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