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