Multivariate Regime–Switching GARCH with an Application to International Stock Markets

Markus Haas () and Stefan Mittnik
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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

No 2008/08, CFS Working Paper Series from Center for Financial Studies

Abstract: 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.

Keywords: Conditional Volatility; Markov–Switching; Multivariate GARCH (search for similar items in EconPapers)
JEL-codes: C32 C51 G10 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-fmk and nep-rmg
Date: 2008-01
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