Multivariate rotated ARCH models
Funding Number
RF
Funding Sponsor
Wells Fargo
Author's Department
Economics Department
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https://doi.org/10.1016/j.jeconom.2013.10.003
Document Type
Research Article
Publication Title
Journal of Econometrics
Publication Date
1-1-2014
doi
10.1016/j.jeconom.2013.10.003
Abstract
This paper introduces a new class of multivariate volatility models which is easy to estimate using covariance targeting, even with rich dynamics. We call them rotated ARCH (RARCH) models. The basic structure is to rotate the returns and then to fit them using a BEKK-type parameterization of the time-varying covariance whose long-run covariance is the identity matrix. This yields the rotated BEKK (RBEKK) model. The extension to DCC-type parameterizations is given, introducing the rotated DCC (RDCC) model. Inference for these models is computationally attractive, and the asymptotics are standard. The techniques are illustrated using data on the DJIA stocks. © 2013 Elsevier B.V. All rights reserved.
First Page
16
Last Page
30
Recommended Citation
APA Citation
Noureldin, D.
Shephard, N.
&
Sheppard, K.
(2014). Multivariate rotated ARCH models. Journal of Econometrics, 179(1), 16–30.
10.1016/j.jeconom.2013.10.003
https://fount.aucegypt.edu/faculty_journal_articles/1914
MLA Citation
Noureldin, Diaa, et al.
"Multivariate rotated ARCH models." Journal of Econometrics, vol. 179,no. 1, 2014, pp. 16–30.
https://fount.aucegypt.edu/faculty_journal_articles/1914