Estimation and Forecasting of Dynamic Conditional Covariance: A Semiparametric Multivariate Model Variables with Econometric Applications
Xiangdong Long (),
Liangjun Su and
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Xiangdong Long: Judge Business School, University of Cambridge
No 200908, Working Papers from University of California at Riverside, Department of Economics
We propose a semiparametric conditional covariance (SCC) estimator that combines the ï¬ rst-stage parametric conditional covariance (PCC) estimator with the second-stage nonparametric correction estimator in a multiplicative way. We prove the asymptotic normality of our SCC estimator, propose a nonparametric test for the correct speciï¬ cation of PCC models, and study its asymptotic properties. We evaluate the ï¬ nite sample performance of our test and SCC estimator and compare the latter with that of PCC estimator, purely nonparametric estimator, and Hafner, Dijk, and Fransesâ€™s (2006) estimator in terms of mean squared error and Value-at-Risk losses via simulations and real data analyses.
Keywords: Conditional Covariance Matrix; Multivariate GARCH; Portfolio; Semiparametric Estimator; Speciï¬ cation Test. (search for similar items in EconPapers)
JEL-codes: C3 C5 G0 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2009-07, Revised 2009-07
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Persistent link: https://EconPapers.repec.org/RePEc:ucr:wpaper:200908
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