A Local Instrumental Variable Estimation Method for Generalized Additive Volatility Models

Abstract

We investigate a new separable nonparametric model for time series, which includes many ARCH models and AR models already discussed in the literature. We also propose a new estimation procedure based on a localization of the econometric method of instrumental variables. Our method has considerable computational advantages over the competing marginal integration or projection method.

JEL Classification: C16, C53, G12