Article

 

How useful is the LAVE method? (p.55-82)  [Fichier PDF]
 
by
 
Aleša Lotrič Dolinar, University of Ljubljana
 
Keywords : LAVE, GARCH, ARIMA, volatility, emerging markets, stock exchange index
JEL classification : C22, C53
 
Abstract
We show that the findings of Mercurio and Spokoiny (2004) concerning their alternative LAVE approach for volatility estimation are not necessarily true for another type of volatile time series, as far as comparison to the usual GARCH(1,1) process is concerned. However, we propose another use of LAVE for the purpose of level, not volatility, modeling – and in our case it turns out to be successful.