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Maximum Likelihood Estimation and Inference in Multivariate Conditionally Heteroscedastic Dynamic Regression Models with Student t Innovations

Gabriele Fiorentini (), Enrique Sentana () and Giorgio Calzolari

Journal of Business & Economic Statistics, 2003, vol. 21, issue 4, 532-46

Abstract: We provide numerically reliable analytical expressions for the score, Hessian, and information matrix of conditionally heteroscedastic dynamic regression models when the conditional distribution is multivariate t. We also derive one-sided and two-sided Lagrange multiplier tests for multivariate normality versus multivariate t based on the first two moments of the squared norm of the standardized innovations evaluated at the Gaussian pseudo-maximum likelihood estimators of the conditional mean and variance parameters. Finally, we illustrate our techniques through both Monte Carlo simulations and an empirical application to 26 U.K. sectoral stock returns that confirms that their conditional distribution has fat tails.

Date: 2003
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Related works:
Working Paper: The Score of Condionally Heteroskedastic Dynamic Regression Models with Student T Innovations, and an LM Test for Multivariate Normality (2000)
Working Paper: THE SCORE OF CONDITIONALLY HETEROSKEDASTIC DYNAMIC REGRESSION MODELS WITH STUDENT T INNOVATIONS, AN LM TEST FOR MULTIVARIATE NORMALITY (2000) Downloads
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