Asymptotics of Cholesky GARCH models and time-varying conditional betas

Serge Darolles, Christian Francq and Sebastien Laurent
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Serge Darolles: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Sebastien Laurent: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper proposes a new model with time-varying slope coefficients. Our model, calledCHAR, is a Cholesky-GARCH model, based on the Cholesky decomposition of the conditional variance matrix introduced by Pourahmadi (1999) in the context of longitudinal data. We derive stationarity and invertibility conditions and prove consistency and asymptotic normality of the Full and equation-by-equation QML estimators of this model. We then show that this class of models is useful to estimate conditional betas and compare it to the approach proposed by Engle (2016). Finally, we use real data in a portfolio and risk management exercise. We find that the CHAR model outperforms a model with constant betas as well as the dynamic conditional beta model of Engle (2016).

Date: 2018-09
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Citations: View citations in EconPapers (1)

Published in Conference on New Developments in Econometrics and Time Series, Sep 2018, Copenhagen, Denmark

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Related works:
Journal Article: Asymptotics of Cholesky GARCH models and time-varying conditional betas (2018)
Working Paper: Asymptotics of Cholesky GARCH Models and Time-Varying Conditional Betas (2018)
Working Paper: Asymptotics of Cholesky GARCH models and time-varying conditional betas (2018)
Working Paper: Asymptotics of Cholesky GARCH models and time-varying conditional betas (2018)
Working Paper: Asymptotics of Cholesky GARCH models and time-varying conditional betas (2018)
Working Paper: Asymptotics of Cholesky GARCH Models and Time-Varying Conditional Betas (2018)
Working Paper: Asymptotics of Cholesky GARCH models and time-varying conditional betas (2018)
Working Paper: Asymptotics of Cholesky GARCH models and time-varying conditional betas (2017)
Working Paper: Asymptotics of Cholesky GARCH models and time-varying conditional betas (2017)
Working Paper: Asymptotics of Cholesky GARCH models and time-varying conditional betas (2016)
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