Modeling Realized Covariance Matrices: A Class of Hadamard Exponential Models

Luc Bauwens and Edoardo Otranto

Journal of Financial Econometrics, 2023, vol. 21, issue 4, 1376-1401

Abstract: Time series of realized covariance matrices can be modeled in the conditional autoregressive Wishart model family via dynamic correlations or via dynamic covariances. Extended parameterizations of these models are proposed, which imply a specific and time-varying impact parameter of the lagged realized covariance (or correlation) on the next conditional covariance (or correlation) of each asset pair. The proposed extensions guarantee the positive definiteness of the conditional covariance or correlation matrix with simple parametric restrictions, while keeping the number of parameters fixed or linear with respect to the number of assets. Two empirical studies reveal that the extended models have superior forecasting performances than their simpler versions and benchmark models.

Keywords: dynamic covariances and correlations; Hadamard exponential matrix; realized covariances (search for similar items in EconPapers)
JEL-codes: C32 C58 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1093/jjfinec/nbac007 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Modeling Realized Covariance Matrices: A Class of Hadamard Exponential Models (2022)
Working Paper: Modelling Realized Covariance Matrices: a Class of Hadamard Exponential Models (2020)
Working Paper: Modelling Realized Covariance Matrices: a Class of Hadamard Exponential Models (2020)
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:oup:jfinec:v:21:y:2023:i:4:p:1376-1401.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Journal of Financial Econometrics is currently edited by Allan Timmermann and Fabio Trojani

More articles in Journal of Financial Econometrics from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().