Range-based multivariate volatility model with double smooth transition in conditional correlation

Ray Chou and Yijie Cai

Global Finance Journal, 2009, vol. 20, issue 2, 137-152

Abstract: This paper proposes a multivariate model named Double Smooth Transition Conditional Correlation Conditional Autoregressive Range (DSTCC-CARR for short). Determined by two transition variables, the correlations smoothly transit from one state to another. Together with the DSTCC-GARCH model, the model is employed to investigate the interdependence between Hong Kong's and international stock markets. It is proved by the empirical analysis that the DSTCC-CARR model is more credible and efficient than the DSTCC-GARCH model. Linkages among Hong Kong's and other world's markets captured by these two models are testified to be consistent with history, and have meaningful interpretations.

Keywords: Multivariate; volatility; CARR; Smooth; transition; GARCH (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:20:y:2009:i:2:p:137-152

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