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The live method for generalized additive volatility models

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We investigate a new separable nonparametric model for time series, which includes many autoregressive conditional heteroskedastic (ARCH) models and autoregressive (AR) models already discussed in the literature. We also propose a new estimation procedure called LIVE, or local instrumental variable estimation, that is based on a localization of the classical instrumental variable method. Our method has considerable computational advantages over the competing marginal integration or projection method. We also consider a more efficient two-step likelihood-based procedure and show that this yields both asymptotic and finite-sample performance gains.

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en

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application/pdf

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http://eprints.lse.ac.uk/321/1/Econ_theory_20-6.pdf

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