Dynamic Density Forecasts for Multivariate Asset Returns

Evarist Stoja and Arnold Polanski ()

Bristol Economics Discussion Papers from School of Economics, University of Bristol, UK

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 technique to evaluate multivariate forecasts, we conclude that the augmented joint density provides highly accurate forecasts of the negative tail of the joint distribution.

Keywords: Time-varying higher co-moments; Joint Density Forecasting; Method of Moments; Multivariate Value-at-Risk. (search for similar items in EconPapers)
JEL-codes: C22 C51 C52 G11 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2009-09
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Dynamic density forecasts for multivariate asset returns (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:bri:uobdis:09/616

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