Dynamic density forecasts for multivariate asset returns

Arnold Polanski and Evarist Stoja

Journal of Forecasting, 2011, vol. 30, issue 6, 523-540

Abstract: We propose a simple and flexible framework for forecasting the joint density of asset returns. The multinormal distribution is augmented with a polynomial in (time-varying) non‐central co‐moments of assets. We estimate the coefficients of the polynomial via the method of moments for a carefully selected set of co‐moments. In an extensive empirical study, we compare the proposed model with a range of other models widely used in the literature. Employing a recently proposed as well as standard techniques to evaluate multivariate forecasts, we conclude that the augmented joint density provides highly accurate forecasts of the ‘negative tail’ of the joint distribution. Copyright (C) 2010 John Wiley & Sons, Ltd.

Keywords: forecasting of joint density; time‐varying higher co‐moments; method of moments; multivariate value‐at‐risk (search for similar items in EconPapers)
Date: 2011
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http://hdl.handle.net/10.1002/for.1192

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Working Paper: Dynamic Density Forecasts for Multivariate Asset Returns (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:jof:jforec:v:30:y:2011:i:6:p:523-540

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