Average Conditional Correlation and Tree Structures for Multivariate GARCH Models

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ISBN 13 :
Total Pages : 36 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Average Conditional Correlation and Tree Structures for Multivariate GARCH Models by : Francesco Audrino

Download or read book Average Conditional Correlation and Tree Structures for Multivariate GARCH Models written by Francesco Audrino and published by . This book was released on 2004 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a simple class of multivariate GARCH models, allowing for time-varying conditional correlations. Estimates for time-varying conditional correlations are constructed by means of a convex combination of averaged correlations (across all series) and dynamic realized (historical) correlations. Our model is very parsimonious. Estimation is computationally feasible in very large dimensions without resorting to any variance reduction technique. We back-test the models on a six-dimensional exchange-rate time series using different goodness-of-fit criteria and statistical tests. We collect empirical evidence of their strong predictive power, also in comparison to alternative benchmark procedures.

The Methodology and Practice of Econometrics

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Publisher : OUP Oxford
ISBN 13 : 0191553255
Total Pages : 464 pages
Book Rating : 4.1/5 (915 download)

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Book Synopsis The Methodology and Practice of Econometrics by : Jennifer Castle

Download or read book The Methodology and Practice of Econometrics written by Jennifer Castle and published by OUP Oxford. This book was released on 2009-04-30 with total page 464 pages. Available in PDF, EPUB and Kindle. Book excerpt: David F. Hendry is a seminal figure in modern econometrics. He has pioneered the LSE approach to econometrics, and his influence is wide ranging. This book is a collection of papers dedicated to him and his work. Many internationally renowned econometricians who have collaborated with Hendry or have been influenced by his research have contributed to this volume, which provides a reflection on the recent advances in econometrics and considers the future progress for the methodology of econometrics. Central themes of the book include dynamic modelling and the properties of time series data, model selection and model evaluation, forecasting, policy analysis, exogeneity and causality, and encompassing. The book strikes a balance between econometric theory and empirical work, and demonstrates the influence that Hendry's research has had on the direction of modern econometrics. Contributors include: Karim Abadir, Anindya Banerjee, Gunnar Bårdsen, Andreas Beyer, Mike Clements, James Davidson, Juan Dolado, Jurgen Doornik, Robert Engle, Neil Ericsson, Jesus Gonzalo, Clive Granger, David Hendry, Kevin Hoover, Søren Johansen, Katarina Juselius, Steven Kamin, Pauline Kennedy, Maozu Lu, Massimiliano Marcellino, Laura Mayoral, Grayham Mizon, Bent Nielsen, Ragnor Nymoen, Jim Stock, Pravin Trivedi, Paolo Paruolo, Mark Watson, Hal White, and David Zimmer.

Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH

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Publisher :
ISBN 13 :
Total Pages : 43 pages
Book Rating : 4.:/5 (248 download)

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Book Synopsis Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH by : Robert F. Engle

Download or read book Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH written by Robert F. Engle and published by . This book was released on 2001 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we develop the theoretical and empirical properties of a new class of multi-variate GARCH models capable of estimating large time-varying covariance matrices, Dynamic Conditional Correlation Multivariate GARCH. We show that the problem of multivariate conditional variance estimation can be simplified by estimating univariate GARCH models for each asset, and then, using transformed residuals resulting from the first stage, estimating a conditional correlation estimator. The standard errors for the first stage parameters remain consistent, and only the standard errors for the correlation parameters need be modified. We use the model to estimate the conditional covariance of up to 100 assets using S&P 500 Sector Indices and Dow Jones Industrial Average stocks, and conduct specification tests of the estimator using an industry standard benchmark for volatility models. This new estimator demonstrates very strong performance especially considering ease of implementation of the estimator

Testing the Structure of Conditional Correlations in Multivariate GARCH Models

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Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)

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Book Synopsis Testing the Structure of Conditional Correlations in Multivariate GARCH Models by : Nadine McCloud

Download or read book Testing the Structure of Conditional Correlations in Multivariate GARCH Models written by Nadine McCloud and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We introduce a class of generally applicable specification tests for constant and dynamic structures of conditional correlations in multivariate GARCH models. The tests are robust to the presence of time-varying higher-order conditional moments of unknown form and are pure significance tests. The tests can identify linear and nonlinear misspecifications in conditional correlations. Our approach does not necessitate a particular parameter estimation method and distributional assumption on the error process. The asymptotic distribution of the tests is invariant to the uncertainty in parameter estimation. We assess the finite sample performance of our tests using simulated and real data.

Three Essays on Modeling Conditional Correlation

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Publisher :
ISBN 13 :
Total Pages : 384 pages
Book Rating : 4.:/5 (318 download)

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Book Synopsis Three Essays on Modeling Conditional Correlation by : Kevin Sheppard

Download or read book Three Essays on Modeling Conditional Correlation written by Kevin Sheppard and published by . This book was released on 2004 with total page 384 pages. Available in PDF, EPUB and Kindle. Book excerpt:

A Multivariate GARCH Model with Time-Varying Correlations

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Publisher :
ISBN 13 :
Total Pages : 30 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis A Multivariate GARCH Model with Time-Varying Correlations by : Yiu Kuen Tse

Download or read book A Multivariate GARCH Model with Time-Varying Correlations written by Yiu Kuen Tse and published by . This book was released on 2000 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we propose a new multivariate GARCH model with time-varying correlations. We adopt the vech representation based on the conditional variances and the conditional correlations. While each conditional-variance term is assumed to follow a univariate GARCH formulation, the conditional-correlation matrix is postulated to follow an autoregressive moving average type of analogue. By imposing some suitable restrictions on the conditional-correlation-matrix equation, we construct a MGARCH model in which the conditional-correlation matrix is guaranteed to be positive definite during the optimisation. Thus, our new model retains the intuition and interpretation of the univariate GARCH model and yet satisfies the positive-definite condition as found in the constant-correlation and BEKK models. We report some Monte Carlo results on the finite-sample distributions of the MLE of the varying-correlation MGARCH model. The new model is applied to some real data sets. It is found that extending the constant-correlation model to allow for time-varying correlations provides some interesting time histories that are not available in a constant-correlation model.

Dynamic Conditional Correlation

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Publisher :
ISBN 13 :
Total Pages : 27 pages
Book Rating : 4.:/5 (247 download)

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Book Synopsis Dynamic Conditional Correlation by : Robert F. Engle

Download or read book Dynamic Conditional Correlation written by Robert F. Engle and published by . This book was released on 2000 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Simulating Security Returns

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Publisher : Springer
ISBN 13 : 1137465557
Total Pages : 183 pages
Book Rating : 4.1/5 (374 download)

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Book Synopsis Simulating Security Returns by : Giovanni Barone Adesi

Download or read book Simulating Security Returns written by Giovanni Barone Adesi and published by Springer. This book was released on 2014-10-14 with total page 183 pages. Available in PDF, EPUB and Kindle. Book excerpt: Practitioners in risk management are familiar with the use of the FHS (filtered historical simulation) to finding realistic simulations of security returns. This approach has become increasingly popular over the last fifteen years, as it is both flexible and reliable, and is now being accepted in the academic community. Simulating Security Returns is a useful guide for researchers, students, and practitioners. It uses the FHS approach to help simulate the returns of large portfolios of securities. While other simulation methods use the covariance matrix of security returns, which suffers the curse of dimensionality even for modest portfolios, Barone Adesi demonstrates how FHS can accurately adjust to current market conditions.

A Multivariate GARCH Model with Time-Varying Correlations

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Publisher :
ISBN 13 :
Total Pages : 34 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis A Multivariate GARCH Model with Time-Varying Correlations by : Y.K. Tse

Download or read book A Multivariate GARCH Model with Time-Varying Correlations written by Y.K. Tse and published by . This book was released on 2018 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we propose a new multivariate GARCH model with time-varying correlations. We adopt the vech representation based on the conditional variances and the conditional correlations. While each conditional-variance term is assumed to follow a univariate GARCH formulation, the conditional-correlation matrix is postulated to follow an autoregressive moving average type of analogue. By imposing some suitable restrictions on the conditional-correlation-matrix equation, we construct a MGARCH model in which the conditional-correlation matrix is guaranteed to be positive definite during the optimization. Thus, our new model retains the intuition and interpretation of the univariate GARCH model and yet satisfies the positive-definite condition as found in the constant-correlation and BEKK models. We report some Monte Carlo results on the finite-sample distributions of the MLE of the varying-correlation MGARCH model. The new model is applied to some real data sets. It is found that extending the constant-correlation model to allow for time-varying correlations provides some interesting time histories that are not available in a constant-correlation model.

An Extended Constant Conditional Correlation GARCH Model and Its Fourth-moment-structure

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ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (834 download)

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Book Synopsis An Extended Constant Conditional Correlation GARCH Model and Its Fourth-moment-structure by : Changli He

Download or read book An Extended Constant Conditional Correlation GARCH Model and Its Fourth-moment-structure written by Changli He and published by . This book was released on 2002 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The constant conditional correlation GARCH model is probably the most frequently applied multivariate GARCH model. In this paper we consider an extension to this model and examine its fourth-moment structure. The extension, first considered by Jeantheau (1998), is motivated by the result found and discussed in the paper that the squared observations from the extended model have a rich autocorrelation structure. This means that already the first-order model is capable of reproducing a whole variety of autocorrelation structures observed in financial return series. These autocorrelations are derived for the first and the second-order constant conditional correlation GARCH model. The usefulness of the theoretical results of the paper is demonstrated by reconsidering an empirical example that appeared in the original paper on the constant conditional correlation GARCH model. -- Autoregressive conditional heteroskedasticity ; moment structure of GARCH ; multivariate conditional heteroskedasticity ; volatility dynamics

Hierarchical Hidden Markov Structure for Dynamic Correlations

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Publisher :
ISBN 13 :
Total Pages : 34 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Hierarchical Hidden Markov Structure for Dynamic Correlations by : Charlot Philippe

Download or read book Hierarchical Hidden Markov Structure for Dynamic Correlations written by Charlot Philippe and published by . This book was released on 2008 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a new multivariate GARCH model with time-varying conditional correlation structure which is a generalization of the Regime Switching Dynamic Correlation (RSDC) of Pelletier (2006). This model, which we name Hierarchical RSDC, is building with the hierarchical generalization of the hidden Markov model introduced by Fine et al. (1998). This can be viewed graphically as a tree-structure with different types of states. The first are called production states and they can emit observations, as in the classical Markov-Switching approach. The second are called abstract states. They can't emit observations but establish vertical and horizontal probabilities that define the dynamic of the hidden hierarchical structure. The main gain of this approach compared to the classical Markov-Switching model is to increase the granularity of the regimes. Our model is also compared to the new Double Smooth Transition Conditional Correlation GARCH model (DSTCC), a STAR approach for dynamic correlations proposed by Silvennoinen and Terasvirta (2007). The reason is that under certain assumptions, the DSTCC and our model represent two classical competing approaches to modeling regime switching. We also perform Monte-Carlo simulations and we apply the model to two empirical applications studying the conditional correlations of selected stock returns. Results show that the Hierarchical RSDC provides a good measure of the correlations and also has an interesting explanatory power.

Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH.

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Publisher :
ISBN 13 :
Total Pages : 43 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH. by : Robert F. Engle

Download or read book Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH. written by Robert F. Engle and published by . This book was released on 2008 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we develop the theoretical and empirical properties of a new class of multivariate GARCH models capable of estimating large time-varying covariance matrices, Dynamic Conditional Correlation Multivariate GARCH. We show that the problem of multivariate conditional variance estimation can be simplified by estimating univariate GARCH models for each asset, and then, using transformed residuals resulting from the first stage, estimating a conditional correlation estimator. The standard errors for the first stage parameters remain consistent, and only the standard errors for the correlation parameters need to be modified. We use the model to estimate the conditional covariance of up to 100 assets using Samp;P 500 Sector Indices and Dow Jones Industrial Average stocks, and conduct specification tests of the estimator using an industry standard benchmark for volatility models. This new estimator demonstrates very strong performance especially considering ease of implementation of the estimator.

A General Multivariate Threshold GARCH Model for Dynamic Correlations

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Publisher :
ISBN 13 :
Total Pages : 41 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis A General Multivariate Threshold GARCH Model for Dynamic Correlations by : Francesco Audrino

Download or read book A General Multivariate Threshold GARCH Model for Dynamic Correlations written by Francesco Audrino and published by . This book was released on 2005 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a new multivariate DCC-GARCH model that extends existing approaches by admitting multivariate thresholds in conditional volatilities and conditional correlations. Model estimation is numerically feasible in large dimensions and positive semi-definiteness of conditional covariance matrices is naturally ensured by the pure model structure. Conditional thresholds in volatilities and correlations are estimated from the data, together with all other model parameters. We study the performance of our approach in some Monte Carlo simulations, where it is shown that the model is able to fit correctly a GARCH-type dynamics and a complex threshold structure in conditional volatilities and correlations of simulated data. In a real data application to international equity markets, we observe estimated conditional volatilities that are strongly influenced by GARCH-type and multivariate threshold effects. Conditional correlations, instead, are determined by simple threshold structures where no GARCH-type effect could be identified.

Modelling Multivariate Autoregressive Conditional Heteroskedasticity with the Double Smooth Transition Conditional Correlation GARCH Model

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Publisher :
ISBN 13 :
Total Pages : 34 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Modelling Multivariate Autoregressive Conditional Heteroskedasticity with the Double Smooth Transition Conditional Correlation GARCH Model by : Annastiina Silvennoinen

Download or read book Modelling Multivariate Autoregressive Conditional Heteroskedasticity with the Double Smooth Transition Conditional Correlation GARCH Model written by Annastiina Silvennoinen and published by . This book was released on 2009 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we propose a multivariate GARCH model with a time-varying conditional correlation structure. The new Double Smooth Transition Conditional Correlation GARCH model extends the Smooth Transition Conditional Correlation GARCH model of Silvennoinen and Terasvirta (2005) by including another variable according to which the correlations change smoothly between states of constant correlations. A Lagrange multiplier test is derived to test the constancy of correlations against the DSTCC-GARCH model, and another one to test for another transition in the STCC-GARCH framework. In addition, other specification tests, with the aim of aiding the model building procedure, are considered. Analytical expressions for the test statistics and the required derivatives are provided. The model is applied to a selection of world stock indices, and it is found that time is an important factor affecting correlations between them.

Multivariate Normal Mixture GARCH

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ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (892 download)

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Book Synopsis Multivariate Normal Mixture GARCH by : Markus Haas

Download or read book Multivariate Normal Mixture GARCH written by Markus Haas and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

A General Multivariate Threshold GARCH Model with Dynamic Conditional Correlations

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Publisher :
ISBN 13 :
Total Pages : 49 pages
Book Rating : 4.:/5 (255 download)

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Book Synopsis A General Multivariate Threshold GARCH Model with Dynamic Conditional Correlations by : Fabio Trojani

Download or read book A General Multivariate Threshold GARCH Model with Dynamic Conditional Correlations written by Fabio Trojani and published by . This book was released on 2005 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Extended Conditional Correlation GARCH Models

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Publisher :
ISBN 13 :
Total Pages : 49 pages
Book Rating : 4.:/5 (938 download)

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Book Synopsis Extended Conditional Correlation GARCH Models by :

Download or read book Extended Conditional Correlation GARCH Models written by and published by . This book was released on 2007 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: