Generalized Dynamic Factor Models and Volatilities: Consistency, Rates, and Prediction Intervals
Matteo Barigozzi and
Marc Hallin
No 2018-33, Working Papers ECARES from ULB -- Universite Libre de Bruxelles
Abstract:
Volatilities, in high-dimensional panels of economic time series with a dynamic factor structure on the levels or returns, typically also admit a dynamic factor decomposition. A two-stage dynamic factor model method recovering common and idiosyncratic volatility shocks therefore was proposed in Barigozzi and Hallin (2016). By exploiting this two-stage factor approach, we build one-step-ahead conditional prediction intervals for large n×T panels of returns. We provide consistency and consistency rates results for the proposed estimators as both n and T tend to infinity. Finally, we apply our methodology to a panel of asset returns belonging to the S&P100 index in order to compute one-step-ahead conditional prediction intervals for the period 2006-2013. A comparison with the componentwise GARCH (1,1) benchmark (which does not take advantage of cross-sectional information) demonstrates the superiority of our approach, which is genuinely multivariate (and high-dimensional), nonparametric, and model-free.
Keywords: Volatility; Dynamic Factor Models; Prediction intervals; GARCH (search for similar items in EconPapers)
Pages: 42 p.
Date: 2018-11
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 (4)
Published by:
Downloads: (external link)
https://dipot.ulb.ac.be/dspace/bitstream/2013/2789 ... LLIN-generalized.pdf Œuvre complète ou partie de l'œuvre (application/pdf)
Related works:
Journal Article: Generalized dynamic factor models and volatilities: Consistency, rates, and prediction intervals (2020) 
Working Paper: Generalized Dynamic Factor Models and Volatilities: Consistency, rates, and prediction intervals (2019) 
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:eca:wpaper:2013/278905
Ordering information: This working paper can be ordered from
http://hdl.handle.ne ... lb.ac.be:2013/278905
Access Statistics for this paper
More papers in Working Papers ECARES from ULB -- Universite Libre de Bruxelles Contact information at EDIRC.
Bibliographic data for series maintained by Benoit Pauwels (bpauwels@ulb.ac.be).