A new wavelet-based nonparametric estimator is introduced in an effort to approximate variance functions. The new estimator possesses some superior qualities that are illustrated through its actual performance in some simulations. Citation Copyright 2000 by Kluwer Academic Publishers.

A new wavelet-based estimator is introduced which combines the state-space model with the wavelet transform in an effort to explore the stock market inefficiency. The new estimator possesses some superior qualities that are illustrated through its actual performance in forecasting the S&P 500....