 Volatility Comovement: a multifrequency approachLaurent Calvet, Adlai Fisher and Samuel B. Thompson Post-Print from HAL Abstract: We implement a multifrequency volatility decomposition of three exchange rates and show that components with similar durations are strongly correlated across series. This motivates a bivariate extension of the Markov-Switching Multifractal (MSM) introduced in Calvet and Fisher (J. Econ. 105 (2001) 27, J. Financ. Econ. 2 (2004) 49). Bivariate MSM is a stochastic volatility model with a closed-form likelihood. Estimation can proceed by maximum likelihood for state spaces of moderate size, and by simulated likelihood via a particle filter in high-dimensional cases. We estimate the model and confirm its main assumptions in likelihood ratio tests. Bivariate MSM compares favorably to a standard multivariate GARCH both in- and out-of-sample. A parsimonious multifrequency factor structure is finally proposed for multivariate settings with potentially many assets. Keywords: Multivariate MSM; Maximum likelihood; Particle filter; Markov-switching; Stochastic volatility; Multifrequency volatility decomposition; Value-at-risk; Quantile forecasts (search for similar items in EconPapers) Published in Econometrics, 2006, Vol.131,n°1-2, pp.179-215. ⟨10.1016/j.jeconom.2005.01.008⟩ There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00459667 DOI: 10.1016/j.jeconom.2005.01.008 Access Statistics for this paper More papers in Post-Print from HAL |
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