Finance and Economics Discussion Series (FEDS)

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September 2017

Regular Variation of Popular GARCH Processes Allowing for Distributional Asymmetry

Todd Prono

Abstract:

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.

Accessible materials (.zip)

Keywords: GARCH, Pareto tail, heavy tail, regular variation, threshold GARCH

DOI: https://doi.org/10.17016/FEDS.2017.095

PDF: Full Paper

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Last Update: January 09, 2020