Publication:
Bootstraping financial time series

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2002-07
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Wiley-Blackwell
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Abstract
It is well known that time series of returns are characterized by volatility clustering and excess kurtosis. Therefore, when modelling the dynamic behavior of returns, inference and prediction methods, based on independent and/or Gaussian observations may be inadequate. As bootstrap methods are not, in general, based on any particular assumption on the distribution of the data, they are well suited for the analysis of returns. This paper reviews the application of bootstrap procedures for inference and prediction of financial time series. In relation to inference, bootstrap techniques have been applied to obtain the sample distribution of statistics for testing, for example, autoregressive dynamics in the conditional mean and variance, unit roots in the mean, fractional integration in volatility and the predictive ability of technical trading rules. On the other hand, bootstrap procedures have been used to estimate the distribution of returns which is of interest, for example, for Value at Risk (VaR) models or for prediction purposes. Although the application of bootstrap techniques to the empirical analysis of financial time series is very broad, there are few analytical results on the statistical properties of these techniques when applied to heteroscedastic time series. Furthermore, there are quite a few papers where the bootstrap procedures used are not adequate.
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Forecasting, GARCH models, Non–Gaussian distributions, Stochastic Volatility, Variance ratio test, Value–at–Risk (VaR), Technical Trading Rules, Prediction
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Journal of Economic Surveys, 2002, vol. 16, n. 3, p. 271-300