Constrained QML Estimation for Multivariate Asymmetric MEM with Spillovers: The Practicality of Matrix Inequalities

Menelaos Karanasos (), Yongdeng Xu and Stavroula Yfanti ()
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Stavroula Yfanti: School of Business and Economics, Loughborough University

No E2017/14, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: In this paper, we review and generalize results on the derivation of tractable non-negativity (necessary and sufficient) conditions for N-dimensional asymmetric MEM and GARCH/HEAVY models with spillovers. We show that the non-negativity constraints are translated into simple matrix inequalities, which are easily handled. In practice, these conditions may not be ful lled. To deal with these cases, we propose a constrained QML estimation. We also obtain new theoretical results about the second moment structure and the optimal forecasts of such multivariate processes. Four empirical examples are included to show the e ectiveness of the proposed method.

Keywords: Constrained QML Estimation; GARCH; Matrix Inequalities; MEM; Multivariate Modelling; Second Moment Structure (search for similar items in EconPapers)
JEL-codes: C32 C53 C58 G15 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2017-11
New Economics Papers: this item is included in nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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