MGARCH models: tradeoff between feasibility and flexibility
Luiz Hotta and
Daniel De Almeida
DES - Working Papers. Statistics and Econometrics. WS from Universidad Carlos III de Madrid. Departamento de Estadística
The parameters of popular multivariate GARCH (MGARCH) models are restricted so that their estimation is feasible in large systems and covariance stationarity and positive definiteness of conditional covariance matrices are guaranteed. These restrictions limit the dynamics that the models can represent, assuming, for example, that volatilities evolve in an univariate fashion, not being related neither among them nor with the correlations. This paper updates previous surveyson parametric MGARCH models focusing on their limitations to represent the dynamics observed in real systems of financial returns. The conclusions are illustrated using simulated data and a five-dimensional system of exchange rate returns.
Keywords: BEKK; DCC; Multivariate; conditional; heteroscedasticity; Variance; targeting; VECH (search for similar items in EconPapers)
JEL-codes: C32 C52 C58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Journal Article: MGARCH models: Trade-off between feasibility and flexibility (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cte:wsrepe:ws1516
Access Statistics for this paper
More papers in DES - Working Papers. Statistics and Econometrics. WS from Universidad Carlos III de Madrid. Departamento de Estadística
Bibliographic data for series maintained by Ana Poveda ().