Proxy-identification of a structural MGARCH model for asset returns

Matthias Fengler and Jeannine Polivka

No 2103, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

Abstract: We extend the multivariate GARCH (MGARCH) specification for volatility modeling by developing a structural MGARCH model that targets the identification of shocks and volatility spillovers in a speculative return system. Similarly to the proxy-SVAR framework, we leverage auxiliary proxy variables to identify the underlying shock system. The estimation of structural parameters, including an orthogonal matrix, is achieved through techniques derived from Riemannian optimization. Our analysis of daily S&P 500 returns, 10-year Treasury yields, and the U.S. Dollar Index, employing news-driven instrument variables, identifies an equity and a bond market shock.

Keywords: identification; Riemannian optimization; structural MGARCH; structural modeling; variance decomposition; volatility spillovers (search for similar items in EconPapers)
JEL-codes: C32 C51 C58 G12 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2021-04, Revised 2024-10
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-ore and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Proxy-identification of a structural MGARCH model for asset returns (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:econwp:2021:03

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