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The Estimation of Heavy Tails in Non-linear Models

Josephine N. Onyeka-Ubaka
Olaide Abass


A generalized student t distribution technique based on estimation of bilinear generalized autoregressive conditional heteroskedasticity (BL-GARCH) model is introduced. The paper investigates from empirical perspective, aspects of the model related to the economic and financial risk management and its impacts on volatility forecasting. The purposive sampling technique was applied to select four banks for the study, namely First Bank of Nigeria (FBN), Guaranty Trust Bank (GTB), United Bank for Africa (UBA) and Zenith Bank (ZEB). The four banks are selected, because their daily stock prices are considered to be more susceptible to volatility than those of other banks within the sampled period (January 2007–May 2022). The data collected were analyzed using MATLAB R2008b Software. The results show that the newly introduced generalized student t distribution is the most general of all the useful distributions applied in the BL-GARCH model parameter estimation. It serves as a general distribution for obtaining empirical characteristics such as volatility clustering, leptokurtosis and leverage effects between returns and conditional variances as well as capturing heavier and lighter tails in high frequency financial time series data.

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eISSN: 2507-7961
print ISSN: 0856-1761