A component model for dynamic correlations
Riccardo Colacito (),
Robert Engle and
Journal of Econometrics, 2011, vol. 164, issue 1, 45-59
We propose a model of dynamic correlations with a short- and long-run component specification, by extending the idea of component models for volatility. We call this class of models DCC-MIDAS. The key ingredients are the Engle (2002) DCC model, the Engle and Lee (1999) component GARCH model replacing the original DCC dynamics with a component specification and the Engle etÂ al. (2006) GARCH-MIDAS specification that allows us to extract a long-run correlation component via mixed data sampling. We provide a comprehensive econometric analysis of the new class of models, and provide extensive empirical evidence that supports the model's specification.
Keywords: Dynamic; correlations; Forecasting; Mixed; data; sampling (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:164:y:2011:i:1:p:45-59
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