Bayesian Analysis of the Box-Cox Transformation in Stochastic Volatility Models
Journal Title: Dynamic Econometric Models - Year 2009, Vol 9, Issue 1
Abstract
In the paper, we consider the Box-Cox transformation of financial time series in Stochastic Volatility models. Bayesian approach is applied to make inference about the Box-Cox transformation parameter (). Using daily data (quotations of stock indices), we show that in the Stochastic Volatility models with fat tails and correlated errors (FCSV), the posterior distribution of parameter strongly depends on the prior assumption about this parameter. In the majority of cases the values of close to 0 are more probable a posteriori than the ones close to 1.
Authors and Affiliations
Anna Pajor
Keywords
Related Articles
- EP ID EP113921
- DOI -
- Views 103
- Downloads 0
Modelling and Forecasting Business Cycle in CEE Countries using a Threshold Approach
We propose to apply a time-series-based nonlinear mechanism in the threshold autoregression (TAR) form in order to examine business cycles in Central and Eastern European economies and compare them to the entire EU busin...
Combined Forecasts Using the Akaike Weights
The focus in the paper is on the information criteria approach and especially the Akaike information criterion which is used to obtain the Akaike weights. This approach enables to receive not one best model, but several...
The Expectations Hypothesis of the Term Structure of LIBOR US Dollar Interest Rates
Using the monthly sampled data on LIBOR US dollar interest rates and maturities ranging from 1 to 12 months from 1995 to 2009 we provide with a number of tests of the expectations hypothesis based on a 3-variable VAR all...
Density Forecasts Based on Disaggregate Data: Nowcasting Polish Inflation
The paper investigates gains in performance of density forecasts from models using disaggregate data when forecasting aggregate series. The problem is considered within a restricted VAR framework with alternative sets of...
The Formula of Unconditional Kurtosis of Sign-Switching GARCH(p,q,1) Processes
In the paper we argue that a general formula for the unconditional kurtosis of sign-switching GARCH(p,q,k) processes proposed by Thavaneswaran and Appadoo (2006) does not give correct results. To show that we revised the...