Estimation of stable distributions with indirect inference
Garcia, Rene Renault, Eric Veredas, David
Garcia, Rene
Renault, Eric
Veredas, David
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Publication Type
Journal article
Editor
Supervisor
Publication Year
2011
Journal
Journal of Econometrics
Book
Publication Volume
161
Publication Issue
3
Publication Begin page
325
Publication End page
337
Publication Number of pages
Abstract
This article deals with the estimation of the parameters of an a-stable distribution with indirect inference, using the skewed t- distribution as an auxiliary model. The latter distribution appears as a good candidate since it has the same number of parameters as the a-stable distribution, with each parameter playing a similar role. To improve the properties of the estimator in finite sample, we use constrained indirect inference. In a Monte Carlo study we show that this method delivers estimators with good properties in finite sample. We provide an empirical application to the distribution of jumps in the S&P 500 index returns.
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Accounting & Finance