Scientific journal paper Q2
Performance comparison of alternative volatility models applied to economic indexes: The role of asymmetric effects
Mário Fernandes (Fernandes, M. C); Tiago Mota Dutra (Dutra, T. M.); João C. A. Teixeira (Teixeira, J. C. A.); Inês Silvestre (Silvestre, I.);
Journal Title
Applied Economics
Year (definitive publication)
N/A
Language
English
Country
United Kingdom
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Abstract
This article examines the empirical relationship between economic indexes – namely the industrial production and the consumer confidence – and their volatility by using the United States data over the periods 1919–2023 and 1960–2023, respectively. To address this topic, several GARCH-family models including volatility feedback and the asymmetric effects are estimated. We find that (i) the industrial production index exhibits asymmetric effects, with significant fitting performance over the standard GARCH model; (ii) the inclusion of t-distributed innovations in the error term improves the fitting performance of the competing models against their counterparts with a normal distribution assumption; (iii) both models tested for the consumer confidence index exhibit similar performance to fit with the data; (iv) by excluding the months during and after the COVID-19 pandemics and the Russia–Ukraine conflict, it leads to the same results and conclusions for both economic indexes. Conditional heteroscedasticity, economic growth, GARCH models, asymmetric effects, volatility feedback.
Acknowledgements
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Keywords
Economic growth,GARCH models,Asymmetric effects,Volatility feedback,Conditional heteroskedasticity
  • Economics and Business - Social Sciences
Funding Records
Funding Reference Funding Entity
UIDB/00315/2020 Fundação para a Ciência e a Tecnologia
UIDB/00685/2020 Fundação para a Ciência e a Tecnologia
2022 APOIO A FUNCIONAMENTO – CEEAPLA–A Governo Regional dos Açores