EconPapers    
Economics at your fingertips  
 

The Factor--Spline--GARCH Model for High and Low Frequency Correlations

Jose Rangel () and Robert Engle

Journal of Business & Economic Statistics, 2011, vol. 30, issue 1, 109-124

Abstract: We propose a new approach to model high and low frequency components of equity correlations. Our framework combines a factor asset pricing structure with other specifications capturing dynamic properties of volatilities and covariances between a single common factor and idiosyncratic returns. High frequency correlations mean revert to slowly varying functions that characterize long-term correlation patterns. We associate such term behavior with low frequency economic variables, including determinants of market and idiosyncratic volatilities. Flexibility in the time-varying level of mean reversion improves both the empirical fit of equity correlations in the United States and correlation forecasts at long horizons.

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1080/07350015.2012.643132 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The Factor-Spline-GARCH Model for High and Low Frequency Correlations (2009) Downloads
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:taf:jnlbes:v:30:y:2011:i:1:p:109-124

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/UBES20

Access Statistics for this article

Journal of Business & Economic Statistics is currently edited by Eric Sampson, Rong Chen and Shakeeb Khan

More articles in Journal of Business & Economic Statistics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

 
Page updated 2019-10-11
Handle: RePEc:taf:jnlbes:v:30:y:2011:i:1:p:109-124