Dynamic Equicorrelation Stochastic Volatility

Yuta Kurose and Yasuhiro Omori ()
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Yuta Kurose: School of Science and Technology, Kwansei Gakuin University

No CIRJE-F-941, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: A multivariate stochastic volatility model with dynamic equicorrelation and cross leverage effect is proposed and estimated. Using a Bayesian approach, an efficient Markov chain Monte Carlo algorithm is described where we use the multi-move sampler, which generates multiple latent variables simultaneously. Numerical examples are provided to show its sampling efficiency in comparison with the simple algorithm that generates one latent variable at a time given other latent variables. Furthermore, the proposed model is applied to the multivariate daily stock price index data. The model comparisons based on the portfolio performances and DIC show that our model overall outperforms competing models.

Pages: 35 pages
Date: 2014-09
New Economics Papers: this item is included in nep-cmp, nep-ets and nep-ore
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http://www.cirje.e.u-tokyo.ac.jp/research/dp/2014/2014cf941.pdf (application/pdf)

Related works:
Journal Article: Dynamic equicorrelation stochastic volatility (2016)
Working Paper: Dynamic Equicorrelation Stochastic Volatility (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2014cf941

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