Estimation of stable distributions by indirect inference

Ren Garcia, Eric Renault, David Veredas

Research output: Contribution to journalArticleResearchpeer-review

27 Citations (Scopus)

Abstract

This article deals with the estimation of the parameters of an α-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 α-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.

Original languageEnglish
Pages (from-to)325-337
Number of pages13
JournalJournal of Econometrics
Volume161
Issue number2
DOIs
Publication statusPublished - 1 Apr 2011
Externally publishedYes

Keywords

  • Constrained indirect inference
  • Indirect inference
  • Skewed-t distribution
  • Stable distribution

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