Estimation and Testing of Dynamic Models with Generalized Hyperbolic Innovations

Enrique Sentana and Mencía, Javier
Authors registered in the RePEc Author Service: Javier Mencia ()

No 5177, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyse the Generalised Hyperbolic distribution adequacy to model kurtosis and asymmetries in multivariate conditionally heteroskedastic dynamic regression models. We standardise this distribution, obtain analytical expressions for the log-likelihood score, and explain how to evaluate the information matrix. We also derive tests for the null hypotheses of multivariate normal and Student t innovations, and decompose them into skewness and kurtosis components, from which we obtain more powerful one-sided versions. Finally, we present an empirical application to five NASDAQ sectorial stock returns that indicates that their conditional distribution is asymmetric and leptokurtic, which can be successfully exploited for risk management purposes.

Keywords: Inequality constraints; Kurtosis; Multivariate normality test; Skewness; Student t; Supremum test; Tail dependence (search for similar items in EconPapers)
JEL-codes: C32 C52 G11 (search for similar items in EconPapers)
Date: 2005-08
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-fin
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Working Paper: Estimation and Testing of Dynamic Models with Generalised Hyperbolic Innovations (2004)
Working Paper: Estimation and testing of dynamic models with generalised hyperbolic innovations (2004)
Working Paper: Estimation and Testing of Dynamic Models with Generalised Hyperbolic Innovations (2004)
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