Identification of structural multivariate GARCH models

Christian Hafner, Helmut, Herwartz and Simone, Maxand
Additional contact information
Helmut, Herwartz: University of Goettingen
Simone, Maxand: University of Helsinki

No 2018020, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: Multivariate GARCH models are widely used to model volatility and correlation dynamics of nancial time series. These models are typically silent about the transmission of implied orthogonalized shocks to vector returns. We propose a loss statistic to discriminate in a data-driven way between alternative structural assumptions about the transmission scheme. In its structural form, a four dimensional system comprising US and Latin American stock market returns points to a substantial volatility transmission from the US to the Latin American markets. The identified structural model improves the estimation of classical measures of portfolio risk, as well as corresponding variations.

Keywords: structural innovations; identifying assumptions; MGARCH; portfolio risk; volatility transmission (search for similar items in EconPapers)
JEL-codes: C32 G15 (search for similar items in EconPapers)
Date: 2018-07-25
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-ore and nep-rmg
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Related works:
Journal Article: Identification of structural multivariate GARCH models (2022)
Working Paper: Identification of structural multivariate GARCH models (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2018020

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