DYNAMIC MODELING OF HIGH-DIMENSIONAL CORRELATION MATRICES IN FINANCE

Vasyl Golosnoy and Helmut Herwartz ()
Additional contact information
Helmut Herwartz: Institute of Statistics and Econometrics, CAU Kiel, Olshausenstr. 40, Kiel 24118, Germany

International Journal of Theoretical and Applied Finance (IJTAF), 2012, vol. 15, issue 05, 1-22

Abstract: A class of dynamic factor and dynamic panel models is proposed for daily high dimensional correlation matrices of asset returns. These flexible semiparametric predictors process ultra high frequency information and allow to exploit both realized correlation matrices and exogenous factors for forecasting purposes. The Fisher-z transformation offers the transmission from (factor and panel) time series models operating on unrestricted random variables to bounded correlation forecasts. Our methodology is contrasted with prominent alternative correlation models. Based on economic performance criteria dynamic factor models turn out to carry the highest predictive content.

Keywords: Dynamic panel model; dynamic factor model; Fisher-z transformation; realized correlations (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219024912500355
Access to full text is restricted to subscribers

Related works:
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:wsi:ijtafx:v:15:y:2012:i:05:n:s0219024912500355

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219024912500355

Access Statistics for this article

International Journal of Theoretical and Applied Finance (IJTAF) is currently edited by L P Hughston

More articles in International Journal of Theoretical and Applied Finance (IJTAF) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().