Multivariate Regime–Switching GARCH with an Application to International Stock Markets
Markus Haas () and
Stefan Mittnik Additional contact information Markus Haas: University of Munich, Institute of Statistics
Stefan Mittnik: Department of Statistics, University of Munich, Center for Financial Studies, Frankfurt, and Ifo Institute for Economic Research, Munich
We develop a multivariate generalization of the Markov–switching GARCH model introduced by Haas, Mittnik, and Paolella (2004b) and derive its fourth–moment structure. An application to international stock markets illustrates the relevance of accounting for volatility regimes from both a statistical and economic perspective, including out–of–sample portfolio selection and computation of Value–at–Risk.