Variance (Non) Causality in Multivariate GARCH

Massimiliano Caporin

Econometric Reviews, 2007, vol. 26, issue 1, 1-24

Abstract: This paper extends the current literature on the variance-causality topic providing the coefficient restrictions ensuring variance noncausality within multivariate GARCH models with in-mean effects. Furthermore, this paper presents a new multivariate model, the exponential causality GARCH. By the introduction of a multiplicative causality impact function, the variance causality effects becomes directly interpretable and can therefore be used to detect both the existence of causality and its direction; notably, the proposed model allows for increasing and decreasing variance effects. An empirical application evidences negative causality effects between returns and volume of an Italian stock market index future contract.

Keywords: Multivariate GARCH; Variance causality; Volatility (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (7)

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DOI: 10.1080/07474930600972178

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