A generalized dynamic conditional correlation model for many asset returns

Christian Hafner and Philip Hans Franses

No EI 2003-18, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: In this paper we put forward a generalization of the Dynamic Conditional Correlation (DCC) Model of Engle (2002). Our model allows for asset-specific correlation sensitivities, which is useful in particular if one aims to summarize a large number of asset returns. The resultant GDCC model is considered for daily data on 18 German stock returns, which are all included in the DAX, and for 25 UK stock returns in the FTSE. We find convincing evidence that the GDCC model improves on the DCC model and also on the CCC model of Bollerslev (1990).

Keywords: dynamic conditional correlation; multivariate GARCH (search for similar items in EconPapers)
JEL-codes: C14 C22 (search for similar items in EconPapers)
Date: 2003-07-08
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Citations: View citations in EconPapers (29)

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