Regular Variation of Popular GARCH Processes Allowing for Distributional Asymmetry
11 Pages Posted: 26 Sep 2017
Date Written: 2017-09-22
Linear GARCH(1,1) and threshold GARCH(1,1) processes are established as regularly varying, meaning their heavy tails are Pareto like, under conditions that allow the innovations from the, respective, processes to be skewed. Skewness is considered a stylized fact for many financial returns assumed to follow GARCH-type processes. The result in this note aids in establishing the asymptotic properties of certain GARCH estimators proposed in the literature.
Keywords: GARCH, Pareto tail, Heavy tail, Regular variation, Threshold GARCH
JEL Classification: C20, C22, C53, C58
Suggested Citation: Suggested Citation