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 101
- Downloads 0
Comparison of Certain Dynamic Estimation Methods of Value at Risk on Polish Gas Market
The paper compares the results of the estimation of VaR made using Markov chains as well as linear and non-linear autoregressive models. A comparative analysis was conducted for linear returns of the daily value of the g...
The Model of French Development Assistance – Who Gets the Help?
Development cooperation is an important element of international relations because it influences the power balance between major players on the world markets and in the political debate. The aim of the article was to ana...
Regime-dependent Assessment of Risk Concerning the International Aviation Inclusion Into the EU ETS
In this article the European Union Aviation Allowances (EUAA) price risk, associated with the activity of aircraft operators within the European Economic Area (EEA), has been evaluated across the low and high volatility...
Space-Time Modelling of the Unemployment Rate in Polish Poviats
The purpose of the article is to model the unemployment rate in Poland in its spatial and time dimensions. The spatial lag models with the neighbourhood matrix based on the common border of poviats were used in the study...
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...