A Bayesian non-parametric approach to asymmetric dynamic conditional correlation model with application to portfolio selection

Audrone Virbickaite, María Concepción Ausín Olivera and Pedro Galeano

DES - Working Papers. Statistics and Econometrics. WS from Universidad Carlos III de Madrid. Departamento de Estadística

Abstract: We use an asymmetric dynamic conditional correlation (ADCC) GJR-GARCH model to estimate the time-varying volatilities of financial returns. The ADCC-GJR-GARCH model takes into consideration the asymmetries in individual assets volatilities, as well as in the correlations. The errors are modeled using a flexible location-scale mixture of infinite Gaussian distributions and the inference and estimation is carried out by relying on Bayesian non-parametrics. Finally, we carry out a simulation study to illustrate the flexibility of the new method and present a financial application using Apple and NASDAQ Industrial index data to solve a portfolio allocation problem

Keywords: Asymmetric; dynamic; condition; correlation; Bayesian; non-parametrics; Dirichlet; process; mixtures; Portfolio; allocation (search for similar items in EconPapers)
Date: 2013-05
New Economics Papers: this item is included in nep-ecm and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://e-archivo.uc3m.es/rest/api/core/bitstreams ... b20aa95f3498/content (application/pdf)

Related works:
Journal Article: A Bayesian non-parametric approach to asymmetric dynamic conditional correlation model with application to portfolio selection (2016)
Working Paper: A Bayesian Non-Parametric Approach to Asymmetric Dynamic Conditional Correlation Model With Application to Portfolio Selection (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cte:wsrepe:ws131009

Access Statistics for this paper

More papers in DES - Working Papers. Statistics and Econometrics. WS from Universidad Carlos III de Madrid. Departamento de Estadística
Bibliographic data for series maintained by Ana Poveda ().