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R-estimators in GARCH models; asymptotics and applications

Research output: Contribution to journalJournal articlepeer-review

E-pub ahead of print
<mark>Journal publication date</mark>30/08/2021
<mark>Journal</mark>The Econometrics Journal
Publication StatusE-pub ahead of print
Early online date30/08/21
<mark>Original language</mark>English

Abstract

The quasi-maximum likelihood estimation is a commonly-used method for estimating the GARCH parameters. However, such estimators are sensitive to outliers and their asymptotic normality is proved under the finite fourth moment assumption on the underlying error distribution. In this paper, we propose a novel class of estimators of the GARCH parameters based on ranks of the residuals, called R-estimators, with the property that they are asymptotically normal under the existence of a finite $2+\delta$ moment of the errors and are highly efficient.
We propose fast algorithm for computing the R-estimators.
Both real data analysis and simulations show the superior performance of the
proposed estimators under the heavy-tailed and asymmetric distributions.