Modeling Conditional Heteroscedasticity in Nonstationary Series

Abstract

To accommodate the inhomogenous character of financial time series over longer time periods, standard parametric models can be extended by allowing their coefficients to vary over time. Focusing on conditional heteroscedasticity models, we discuss various strategies to identify and estimate varying-coefficients models and compare all methods by means of a real-data application.

Keywords: Adaptive Estimation, Conditional Heteroscedasticity, Varying-Coefficient Models, Time Series

JEL Classification: C14, C22, C53