Flexible multivariate GARCH modeling with an application to international stock markets

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• dc.contributor.author Ledoit, Olivierca
• dc.contributor.author Santa Clara, Pedroca
• dc.contributor.author Wolf, Michaelca
• dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
• dc.date.accessioned 2017-07-26T10:48:13Z
• dc.date.available 2017-07-26T10:48:13Z
• dc.date.issued 2001-10-01
• dc.date.modified 2017-07-23T02:06:27Z
• dc.description.abstract The goal of this paper is to estimate time-varying covariance matrices. Since the covariance matrix of financial returns is known to change through time and is an essential ingredient in risk measurement, portfolio selection, and tests of asset pricing models, this is a very important problem in practice. Our model of choice is the Diagonal-Vech version of the Multivariate GARCH(1,1) model. The problem is that the estimation of the general Diagonal-Vech model model is numerically infeasible in dimensions higher than 5. The common approach is to estimate more restrictive models which are tractable but may not conform to the data. Our contribution is to propose an alternative estimation method that is numerically feasible, produces positive semi-definite conditional covariance matrices, and does not impose unrealistic a priori restrictions. We provide an empirical application in the context of international stock markets, comparing the new estimator to a number of existing ones.
• dc.format.mimetype application/pdfca
• dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=578
• dc.identifier.citation Review of Economics and Statistics 85, 735-747, 2003
• dc.identifier.uri http://hdl.handle.net/10230/892
• dc.language.iso eng
• dc.relation.ispartofseries Economics and Business Working Papers Series; 578
• dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
• dc.subject.keyword diagonal-vech model multivariate garch
• dc.subject.keyword unrestricted estimation
• dc.subject.keyword Finance and Accounting
• dc.title Flexible multivariate GARCH modeling with an application to international stock marketsca
• dc.type info:eu-repo/semantics/workingPaper