Stochastic volatility with leverage: fast likelihood inference

Yasuhiro Omori (), Siddhartha Chib, Neil Shephard () and Jouchi Nakajima
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Siddhartha Chib: Washington University

No 2004-W19, Economics Papers from Economics Group, Nuffield College, University of Oxford

Abstract: Kim, Shephard and Chib (1998) provided a Bayesian analysis of stochastic volatility models based on a very fast and reliable Markov chain Monte Carlo (MCMC) algorithm. Their method ruled out the leverage effect, which limited its scope for applications. Despite this, their basic method has been extensively used in financial economics literature and more recently in macroeconometrics. In this paper we show how to overcome the limitation of this analysis so that the essence of the Kim, Shephard and Chib (1998) can be used to deal with the leverage effect, greatly extending the applicability of this method. Several illustrative examples are provided.

Keywords: Leverage effect; Markov chain Monte Carlo; Mixture sampler; Stochastic volatility; Stock returns. (search for similar items in EconPapers)
Pages: 23 pages
Date: 2004-08-22
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 (7)

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Related works:
Working Paper: Stochastic volatility with leverage: fast likelihood inference (2004)
Working Paper: Stochastic Volatility with Leverage: Fast Likelihood Inference (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:nuf:econwp:0419

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