Positivity constraints on the conditional variances in the family of conditional correlation GARCH models
AbstractIn this article, we derive a set of necessary and sufficient conditions for positivity of the vector conditional variance equation in multivariate GARCH models with explicit modelling of conditional correlation. These models include the constant conditional correlation GARCH model of Bollerslev [1990. Review of Economics and Statistics 72, 498-505] and its extensions. Under the new conditions, it is possible to introduce negative volatility spillovers in the model. An empirical example illustrates usefulness of having such conditions in practice.
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Bibliographic InfoArticle provided by Elsevier in its journal Finance Research Letters.
Volume (Year): 5 (2008)
Issue (Month): 2 (June)
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Web page: http://www.elsevier.com/locate/frl
Other versions of this item:
- Nakatani, Tomoaki & Teräsvirta, Timo, 2007. "Positivity Constraints on the Conditional Variances in the Family of Conditional Correlation GARCH Models," Working Paper Series in Economics and Finance 675, Stockholm School of Economics, revised 15 Nov 1007.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- G19 - Financial Economics - - General Financial Markets - - - Other
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