A Non-stationary Approach for Financial Returns with Nonparametric Heteroscedasticity

A non-stationary regression model for financial returns is examined theoretically in this paper.Volatility dynamics are modelled both exogenously and deterministic, captured by a nonparametriccurve estimation on equidistant centered returns. We prove consistency and asymptotic normalityof a symmetric variance estimator and of a one-sided variance estimator analytically, and derive remarkson the bandwidth decision. Further attention is paid to asymmetry and heavy tails of the returndistribution, implemented by an asymmetric version of the Pearson type VII distribution for randominnovations. By providing a method of moments for its parameter...