Threshold ARCH(1) processes: asymptotic inference

Abstract

This article discusses large sample inference problems for a first-order ARCH(1) process where threshold appears not only in the mean but also in the variance function. Geometric ergodicity of the process is discussed. Least-squares estimators of parameters are derived and relevant limit results are obtained. Also, the uniform local asymptotic normality of the log-likelihood ratio and a class of efficient estimators are briefly discussed. The model is applied to Korean financial time series. (C) 2001 Elsevier Science B.V. All rights reserved.