methods. The effects of several model characteristics (unit roots, GARCH, stochastic volatility, heavy tailed disturbance …

Carlo methods. The effects of several model characteristics (unit roots, GARCH, stochastic volatility, heavy tailed …

The GARCH model and the Stochastic Volatility [SV] model are competing but non-nested models to describe unobserved … volatility in asset returns. We propose a GARCH model with an additional error term, which can capture SV model properties, and … which can be used to test GARCH against SV. We discuss model representation, parameter estimation and a simple test for …