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On conditionally heteroscedastic AR models with thresholds
Journal article   Peer reviewed

On conditionally heteroscedastic AR models with thresholds

Kung Sik Chan, Dong Li, Shiqing Ling and Howell Tong
Statistica Sinica, Vol.24(2), pp.625-652
2014
DOI: 10.5705/ss.2012.185

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Abstract

Conditional heteroscedasticity is prevalent in many time series. By view- ing conditional heteroscedasticity as the consequence of a dynamic mixture of in- dependent random variables, we develop a simple yet versatile observable mixing function, leading to the conditionally heteroscedastic AR model with thresholds, or a T-CHARM for short. We demonstrate its many attributes and provide com- prehensive theoretical underpinnings with efficient computational procedures and algorithms. We compare, via simulation, the performance of T-CHARM with the GARCH model. We report some experiences using data from economics, biology, and geoscience.

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