GARCH Processes with Skewed and Leptokurtic Innovations: Revisiting the Johnson SU Case

11 Pages Posted: 18 May 2012

Date Written: May 16, 2012

Abstract

We revisit the specification of GARCH processes with Johnson Su innovations examined in Choi and Nam (2008). This model, allowing for skewed and leptokurtic innovations, has many advantages over well known alternatives. We examine a simpler version of their specification which does not require the introduction of a location parameter. The likelihood function is derived and the model is estimated with the daily returns of six international stock indexes. The results show that the model provides an accurate fit using the past ten years of index returns which include the recent turbulent periods of the sub-prime and European sovereign debt crisis.

Keywords: GARCH, Johnson distributions, skewness, kurtosis

JEL Classification: C58, G17

Suggested Citation

Simonato, Jean-Guy, GARCH Processes with Skewed and Leptokurtic Innovations: Revisiting the Johnson SU Case (May 16, 2012). Available at SSRN: https://ssrn.com/abstract=2060994 or http://dx.doi.org/10.2139/ssrn.2060994

Jean-Guy Simonato (Contact Author)

HEC Montréal ( email )

3000, chemin de la Cote-Sainte-Catherine
Service de l'enseignement de la finance
Montreal, Quebec H3T 2A7
Canada
514-340-6807 (Phone)
514-340-5632 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
89
Abstract Views
572
rank
305,681
PlumX Metrics