Simple Multivariate Conditional Covariance Dynamics Using Hyperbolically Weighted Moving Averages

Kawakatsu Hiroyuki ()
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Kawakatsu Hiroyuki: Business School, Dublin City University, Dublin 9, Ireland

Journal of Econometric Methods, 2021, vol. 10, issue 1, 33-52

Abstract: This paper considers a class of multivariate ARCH models with scalar weights. A new specification with hyperbolic weighted moving average (HWMA) is proposed as an analogue of the EWMA model. Despite the restrictive dynamics of a scalar weight model, the proposed model has a number of advantages that can deal with the curse of dimensionality. The empirical application illustrates that the (pseudo) out-of-sample multistep forecasts can be surprisingly more accurate than those from the DCC model.

Keywords: multivariate GARCH; hyperbolic decay; long memory; rank-one (search for similar items in EconPapers)
JEL-codes: C32 C51 C58 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1515/jem-2020-0004

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