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Bayesian Semi-Nonparametric Arch Models

The Review of Economics and Statistics 1994 76(1), 176
A Bayesian seminonparametric approach to ARCH models is developed with the advantage that small sample results are obtained even when the likelihood function is subject to nonlinear inequality constraints (as in the ARCH models used in this paper). The seminonparametric nature of the approach allows for the relaxation of the assumption of normal errors. An application and a small Monte Carlo study indicate that the methods the author advocates are both feasible and necessary.