Automated Variable Selection in Vector Multiplicative Error Models

Fabrizio Cipollini (cipollini@disia.unifi.it) and Giampiero Gallo (giampiero.gallo@gmail.com)

Econometrics Working Papers Archive from Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti"

Abstract: Multiplicative Error Models (MEM) can be used to trace the dynamics of non–negative valued processes. Interactions between several such processes are accommodated by the vector MEM and estimated by maximum likelihood (Gamma marginals with copula functions) or by Generalized Method of Moments. In choosing the relevant variables one can follow an automated procedure where the full specification is successively pruned in a general–to–specific approach. An efficient and fast algorithm is presented in this paper and evaluated by means of a simulation and a real world example of volatility spillovers in European markets.

Keywords: Multiplicative Error Model; GMM; Simultaneous Equations; Volatility; Market Activity (search for similar items in EconPapers)
JEL-codes: C22 C52 C53 (search for similar items in EconPapers)
Pages: 43
Date: 2009-02
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (1)

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Journal Article: Automated variable selection in vector multiplicative error models (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:fir:econom:wp2009_02

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