Dynamic Conditional Correlations for Asymmetric Processes

Manabu Asai and Michael McAleer

No CARF-F-168, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: The paper develops two Dynamic Conditional Correlation (DCC) models, namely the Wishart DCC (WDCC) model and the Matrix-Exponential Conditional Correlation (MECC) model. The paper applies the WDCC approach to the exponential GARCH (EGARCH) and GJR models to propose asymmetric DCC models. We use the standardized multivariate t-distribution to accommodate heavy-tailed errors. The paper presents an empirical example using the trivariate data of the Nikkei 225, Hang Seng and Straits Times Indices for estimating and forecasting the WDCC-EGARCH and WDCC-GJR models, and compares the performance with the asymmetric BEKK model. The empirical results show that AIC and BIC favour the WDCC-EGARCH model to the WDCC-GJR and asymmetric BEKK models. Moreover, the empirical results indicate that the WDCC-EGARCH-t model produces reasonable VaR threshold forecasts, which are very close to the nominal 1% to 3% values.

Pages: 27 pages
Date: 2009-08
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.carf.e.u-tokyo.ac.jp/old/pdf/workingpaper/fseries/174.pdf (application/pdf)

Related works:
Working Paper: Dynamic Conditional Correlations for Asymmetric Processes (2011)
Working Paper: Dynamic Conditional Correlations for Asymmetric Processes (2010)
Working Paper: Dynamic Conditional Correlations for Asymmetric Processes (2010)
Working Paper: Dynamic Conditional Correlations for Asymmetric Processes (2010)
Working Paper: Dynamic Conditional Correlations for Asymmetric Processes (2009)
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:cfi:fseres:cf168

Access Statistics for this paper

More papers in CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo Contact information at EDIRC.
Bibliographic data for series maintained by ().