Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5054159 | Economic Modelling | 2014 | 12 Pages |
Abstract
This paper proposes a two-regime threshold model for the conditional distribution of stock returns in which returns follow a distinct skewed Student t distribution within each regime: the model allows capturing time variation in the conditional distribution of returns, as well as higher order moments. An application of the model to daily U.S. stock returns illustrates the advantages of the proposed model in comparison to alternative specifications: the model performs well in terms of in-sample fit; it more accurately estimates the conditional volatility; and it produces useful risk assessment as measured by the term structure of value at risk.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Daniele Massacci,