A Multivariate Generalized Orthogonal Factor GARCH Model
AbstractThe paper studies a factor GARCH model and develops test procedures which can be used to test the number of factors needed to model the conditional heteroskedasticity in the considered time series vector. Assuming normally distributed errors the parameters of the model can be straightforwardly estimated by the method of maximum likelihood. Inefficient but computationally simple preliminary estimates are first obtained and used as initial values to maximize the likelihood function. Maximum likelihood estimation with nonnormal errors is also straightforward. Motivated by the empirical application of the paper a mixture of normal distributions is considered. An interesting feature of the implied factor GARCH model is that some parameters of the conditional covariance matrix which are not identifiable in the case of normal errors become identifiable when the mixture distribution is used. As an empirical example we consider a system of four exchange rate return series.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by American Statistical Association in its journal Journal of Business and Economic Statistics.
Volume (Year): 25 (2007)
Issue (Month): (January)
Contact details of provider:
Web page: http://www.amstat.org/publications/jbes/index.cfm?fuseaction=main
Other versions of this item:
- Lanne, Markku & Saikkonen, Pentti, 2005. "A Multivariate Generalized Orthogonal Factor GARCH Model," MPRA Paper 23714, University Library of Munich, Germany.
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- F31 - International Economics - - International Finance - - - Foreign Exchange
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sébastien Laurent & Luc Bauwens & Jeroen V. K. Rombouts, 2006.
"Multivariate GARCH models: a survey,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 21(1), pages 79-109.
- BAUWENS, Luc & LAURENT, Sébastien & ROMBOUTS, Jeroen, 2003. "Multivariate GARCH models: a survey," CORE Discussion Papers 2003031, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- BAUWENS, Luc & LAURENT, Sébastien & ROMBOUTS, Jeroen VK, . "Multivariate GARCH models: a survey," CORE Discussion Papers RP -1847, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Francisco Javier Mencía & Enrique Sentana, 2004.
"Estimation And Testing Of Dynamic Models With Generalised Hyperbolic Innovations,"
- Enrique Sentana, 2004. "Estimation and Testing of Dynamic Models with Generalised Hyperbolic Innovations," FMG Discussion Papers dp502, Financial Markets Group.
- Mencía, Javier & Sentana, Enrique, 2005. "Estimation and Testing of Dynamic Models with Generalized Hyperbolic Innovations," CEPR Discussion Papers 5177, C.E.P.R. Discussion Papers.
- Javier F. Mencia & Enrique Sentana, 2004. "Estimation and testing of dynamic models with generalised hyperbolic innovations," LSE Research Online Documents on Economics 24742, London School of Economics and Political Science, LSE Library.
- Philip Hans Franses & Dick van Dijk & Andre Lucas, 2004.
"Short patches of outliers, ARCH and volatility modelling,"
Applied Financial Economics,
Taylor & Francis Journals, vol. 14(4), pages 221-231.
- Philip Hans Franses & Dick van Dijk & André Lucas, 1998. "Short Patches of Outliers, ARCH and Volatility Modeling," Tinbergen Institute Discussion Papers 98-057/4, Tinbergen Institute.
- I. D. Vrontos & P. Dellaportas & D. N. Politis, 2003. "A full-factor multivariate GARCH model," Econometrics Journal, Royal Economic Society, vol. 6(2), pages 312-334, December.
- Klaassen, F.J.G.M., 1999. "Have Exchange Rates Become More Closely Tied? Evidence from a New Multivariate GARCH Model," Discussion Paper 1999-10, Tilburg University, Center for Economic Research.
- Andrews, Donald W. K., 1987.
"Asymptotic Results for Generalized Wald Tests,"
Cambridge University Press, vol. 3(03), pages 348-358, June.
- Engle, Robert F. & Ng, Victor K. & Rothschild, Michael, 1990.
"Asset pricing with a factor-arch covariance structure : Empirical estimates for treasury bills,"
Journal of Econometrics,
Elsevier, vol. 45(1-2), pages 213-237.
- Robert F. Engle & Victor Ng & Michael Rothschild, 1988. "Asset Pricing with a Factor Arch Covariance Structure: Empirical Estimates for Treasury Bills," NBER Technical Working Papers 0065, National Bureau of Economic Research, Inc.
- Comte, F. & Lieberman, O., 2003. "Asymptotic theory for multivariate GARCH processes," Journal of Multivariate Analysis, Elsevier, vol. 84(1), pages 61-84, January.
- Hafner, C.M. & Herwartz, H., 2003.
"Analytical quasi maximum likelihood inference in multivariate volatility models,"
Econometric Institute Research Papers
EI 2003-21, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- Christian Hafner & Helmut Herwartz, 2008. "Analytical quasi maximum likelihood inference in multivariate volatility models," Metrika, Springer, vol. 67(2), pages 219-239, March.
- Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(01), pages 122-150, February.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.