Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: May, 1997, Volume 65, Issue 3

Asymptotic Bias for Quasi-Maximum-Likelihood Estimators in Conditional Heteroskedasticity Models<587:ABFQEI>2.0.CO;2-V
p. 587-599

Douglas G. Steigerwald, Whitney K. Newey

Virtually all applications of time-varying conditional variance models use a quasi-maximum-likelihood estimator (QMLE). Consistency of a QMLE requires an identification condition that the quasi-log-likelihood have a unique maximum at the true conditional mean and relative scale parameters. We show that the identification condition holds for a non-Gaussian QMLE if the conditional mean is identically zero or if a symmetry condition is satisfied. Without symmetry, an additional parameter, for the location of the innovation density, must be added for identification. We calculate the efficiency loss from adding such a parameter under symmetry, when the parameter is not needed. We also show that there is no efficiency loss for the conditional variance parameters of a GARCH process.

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