Multivariate rotated ARCH models

Diaa Noureldin, Neil Shephard () and Kevin Sheppard

Journal of Econometrics, 2014, vol. 179, issue 1, 16-30

Abstract: This paper introduces a new class of multivariate volatility models which is easy to estimate using covariance targeting, even with rich dynamics. We call them rotated ARCH (RARCH) models. The basic structure is to rotate the returns and then to fit them using a BEKK-type parameterization of the time-varying covariance whose long-run covariance is the identity matrix. This yields the rotated BEKK (RBEKK) model. The extension to DCC-type parameterizations is given, introducing the rotated DCC (RDCC) model. Inference for these models is computationally attractive, and the asymptotics are standard. The techniques are illustrated using data on the DJIA stocks.

Keywords: RARCH; RBEKK; RDCC; Multivariate volatility; Covariance targeting; Common persistence (search for similar items in EconPapers)
JEL-codes: C32 C52 C58 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

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Related works:
Working Paper: Multivariate rotated ARCH models (2014)
Working Paper: Multivariate Rotated ARCH Models (2012)
Working Paper: Multivariate Rotated ARCH models (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:179:y:2014:i:1:p:16-30

DOI: 10.1016/j.jeconom.2013.10.003

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