The conditional autoregressive wishart model for multivariate stock market volatility

Vasyl Golosnoy, Bastian Gribisch and Roman Liesenfeld

No 2010-07, Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics

Abstract: We propose a Conditional Autoregressive Wishart (CAW) model for the analysis of realized covariance matrices of asset returns. Our model assumes a generalized linear autoregressive moving average structure for the scale matrix of the Wishart distribution allowing to accommodate for complex dynamic interdependence between the variances and covariances of assets. In addition, it accounts for symmetry and positive definiteness of covariance matrices without imposing parametric restrictions, and can easily be estimated by Maximum Likelihood. We also propose extensions of the CAW model obtained by including a Mixed Data Sampling (MIDAS) component and Heterogeneous Autoregressive (HAR) dynamics for long-run fluctuations. The CAW models are applied to time series of daily realized variances and covariances for five New York Stock Exchange (NYSE) stocks.

Keywords: Component volatility models; Covariance matrix; Mixed data sampling; Observation-driven models; Realized volatility (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-mst and nep-ore
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Citations: View citations in EconPapers (5)

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Journal Article: The conditional autoregressive Wishart model for multivariate stock market volatility (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cauewp:201007

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