Thresholds, News Impact Surfaces and Dynamic Asymmetric Multivariate GARCH

Massimiliano Caporin and Michael McAleer

No 741, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: DAMGARCH is a new model that extends the VARMA-GARCH model of Ling and McAleer (2003) by introducing multiple thresholds and time-dependent structure in the asymmetry of the conditional variances. Analytical expressions for the news impact surface implied by the new model are also presented. DAMGARCH models the shocks affecting the conditional variances on the basis of an underlying multivariate distribution. It is possible to model explicitly asset-specific shocks and common innovations by partitioning the multivariate density support. This paper presents the model structure, describes the implementation issues, and provides the conditions for the existence of a unique stationary solution, and for consistency and asymptotic normality of the quasi- maximum likelihood estimators. The paper also presents an empirical example to highlight the usefulness of the new model.

Keywords: Multivariate asymmetry; conditional variance; stationarity conditions; asymptotic theory; multivariate news impact curve. (search for similar items in EconPapers)
JEL-codes: C32 C51 C52 (search for similar items in EconPapers)
Pages: 49pages
Date: 2010-11
New Economics Papers: this item is included in nep-ets
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http://www.kier.kyoto-u.ac.jp/DP/DP741.pdf (application/pdf)

Related works:
Journal Article: Thresholds, news impact surfaces and dynamic asymmetric multivariate GARCH (2011)
Working Paper: Thresholds, News Impact Surfaces and Dynamic Asymmetric Multivariate GARCH (2010)
Working Paper: Thresholds, News Impact Surfaces and Dynamic Asymmetric Multivariate GARCH (2010)
Working Paper: Thresholds, News Impact Surfaces and Dynamic Asymmetric Multivariate GARCH (2010)
Working Paper: Threshold, news impact surfaces and dynamic asymmetric multivariate GARCH (2010)
Working Paper: Thresholds, News Impact Surfaces and Dynamic Asymmetric Multivariate GARCH (2010)
Working Paper: Thresholds, News Impact Surfaces and Dynamic Asymmetric Multivariate GARCH (2009)
Working Paper: Thresholds, News Impact Surfaces and Dynamic Asymmetric Multivariate GARCH (2008)
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