RCA models with correlated errors Original Research Article

Financial time series data cannot be adequately modelled by a normal distribution and empirical evidence on the non-normality assumption is very well documented in the financial literature; see [R.F. Engle, Autoregressive conditional heteroskedasticity with estimates of the variance of UK inflation, Econometrica 50 (1982) 987–1008] and [T. Bollerslev, Generalized autoregressive conditional heteroscedasticity, J. Econometrics 31 (1986) 307–327] for details. The kurtosis of various classes of RCA models has been the subject of a study by Appadoo et al. [S.S. Appadoo, M. Gharahmani, A. Thavaneswaran, Moment properties of some volatility models, Math. Sci. 30 (2005) 50–63] and Thavaneswaran et al. [A. Thavaneswaran, S.S. Appadoo, M. Samanta, Random coefficient GARCH models, Math. Comput. Modelling 41 (2005) 723–733]. In this work we derive the kurtosis of the correlated RCA model as well as the normal GARCH model under the assumption that the errors are correlated.