A Multivariate GARCH-Jump Mixture Model

Chenxing Li and John Maheu

MPRA Paper from University Library of Munich, Germany

Abstract: This paper proposes a new parsimonious multivariate GARCH-jump (MGARCH-jump) mixture model with multivariate jumps that allows both jump sizes and jump arrivals to be correlated among assets. Dependent jumps impact the conditional moments of returns as well as beta dynamics of a stock. Applied to daily stock returns, the model identifies co-jumps well and shows that both jump arrivals and jump sizes are highly correlated. The jump model has better predictions compared to a benchmark multivariate GARCH model.

Keywords: Multivariate GARCH; Jumps; Multinomial; Co-jump; beta dynamics; Value-at-Risk (search for similar items in EconPapers)
JEL-codes: C32 C53 C58 G1 G10 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-ore and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:104770

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