Financial Time Series Analysis by GARCH Model with Rational Functions

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An asymmetric GARCH model is constructed with a rational function, called “R-GARCH” model. We compare the R-GARCH model with other asymmetric GARCH models such as EGARCH and GJR models by information criterions. We find that the R-GARCH model is superior to other models, depending on stock data we use. We also construct a GARCH model with an error term by a rational function and find that the model is superior to the GARCH model with a standard normal distribution.