Inequality Constraints in the Univariate GARCH Model |
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Authors: | Daniel B Nelson Charles Q Cao |
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Institution: | Graduate School of Business, University of Chicago , Chicago , IL , 60637 |
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Abstract: | To keep the conditional variances generated by the GARCH (p, q) model nonnegative, Bollerslev imposed nonnegativity constraints on the parameters of the process. We show that these constraints can be substantially weakened and so should not be imposed in estimation. We also provide empirical examples illustrating the importance of relaxing these constraints. |
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Keywords: | Autoregressive conditional heteroscedasticity (ARCH) |
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