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Conditional variance estimation in heteroscedastic regression models
Authors:Lu-Hung Chen  Ming-Yen Cheng  Liang Peng
Affiliation:1. Department of Mathematics, National Taiwan University, No. 1, Sec. 4, Roosevelt Road, Taipei 106, Taiwan;2. School of Mathematics, Georgia Institute of Technology, Atlanta, GA 30332-0160, USA
Abstract:First, we propose a new method for estimating the conditional variance in heteroscedasticity regression models. For heavy tailed innovations, this method is in general more efficient than either of the local linear and local likelihood estimators. Secondly, we apply a variance reduction technique to improve the inference for the conditional variance. The proposed methods are investigated through their asymptotic distributions and numerical performances.
Keywords:Conditional variance   Local likelihood estimation   Local linear estimation   Log-transformation   Variance reduction   Volatility
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