A component model for dynamic correlations
AbstractWe propose a model of dynamic correlations with a short- and long-run component specification, by extending the idea of component models for volatility. We call this class of models DCC-MIDAS. The key ingredients are the Engle (2002) DCC model, the Engle and Lee (1999) component GARCH model replacing the original DCC dynamics with a component specification and the Engle etÂ al. (2006) GARCH-MIDAS specification that allows us to extract a long-run correlation component via mixed data sampling. We provide a comprehensive econometric analysis of the new class of models, and provide extensive empirical evidence that supports the model's specification.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Econometrics.
Volume (Year): 164 (2011)
Issue (Month): 1 (September)
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Web page: http://www.elsevier.com/locate/jeconom
Dynamic correlations Forecasting Mixed data sampling;
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