Multivariate leverage effects and realized semicovariance GARCH models

Tim Bollerslev, Andrew Patton and Rogier Quaedvlieg

Journal of Econometrics, 2020, vol. 217, issue 2, 411-430

Abstract: We propose new asymmetric multivariate volatility models. The models exploit estimates of variances and covariances based on the signs of high-frequency returns, measures known as realized semivariances, semicovariances, and semicorrelations, to allow for more nuanced responses to positive and negative return shocks than threshold “leverage effect” terms traditionally used in the literature. Our empirical implementations of the new models, including extensions of widely-used bivariate GARCH specifications for a number of individual stocks and the aggregate market portfolio as well as larger dimensional dynamic conditional correlation type formulations for a cross-section of individual stocks, provide clear evidence of improved model fit and reveal new and interesting asymmetric joint dynamic dependencies.

Keywords: High-frequency data; Realized volatility; Realized correlation; Semivariance; Asymmetric dependence (search for similar items in EconPapers)
JEL-codes: C22 C51 C53 C58 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:217:y:2020:i:2:p:411-430

DOI: 10.1016/j.jeconom.2019.12.011

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