Multivariate Hyper-Rotated GARCH-BEKK

Manabu Asai and Michael McAleer

Journal of Time Series Econometrics, 2022, vol. 14, issue 2, 175-198

Abstract: For large multivariate models of generalized autoregressive conditional heteroskedasticity (GARCH), it is important to reduce the number of parameters to cope with the ‘curse of dimensionality’. Recently, Laurent, Rombouts and Violante (2014 “Multivariate Rotated ARCH Models” Journal of Econometrics 179: 16–30) developed the rotated multivariate GARCH model, which focuses on the parameters for standardized variables. This paper extends the rotated multivariate GARCH model by considering a hyper-rotation, which uses a more flexible structure for the rotation matrix. The paper shows an alternative representation based on a random coefficient vector autoregressive and moving-average (VARMA) process, and provides the regularity conditions for the consistency and asymptotic normality of the quasi-maximum likelihood (QML) estimator for VARMA with hyper-rotated multivariate GARCH. The paper investigates the finite sample properties of the QML estimator for the new model. Empirical results for four exchange rate returns show the new specifications works satisfactory for reducing the number of parameters.

Keywords: rotated BEKK; hyper-rotated BEKK; diagonal BEKK; multivariate GARCH; quasi-maximum likelihood estimation; consistency; asymptotic normality (search for similar items in EconPapers)
JEL-codes: C13 C32 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1515/jtse-2021-0006 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:jtsmet:v:14:y:2022:i:2:p:175-198:n:3

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/jtse/html

DOI: 10.1515/jtse-2021-0006

Access Statistics for this article

Journal of Time Series Econometrics is currently edited by Javier Hidalgo

More articles in Journal of Time Series Econometrics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().