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Range-based multivariate volatility model with double smooth transition in conditional correlation

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  • Chou, Ray Yeutien
  • Cai, Yijie

Abstract

This paper proposes a multivariate model named Double Smooth Transition Conditional Correlation Conditional Autoregressive Range (DSTCC-CARR for short). Determined by two transition variables, the correlations smoothly transit from one state to another. Together with the DSTCC-GARCH model, the model is employed to investigate the interdependence between Hong Kong's and international stock markets. It is proved by the empirical analysis that the DSTCC-CARR model is more credible and efficient than the DSTCC-GARCH model. Linkages among Hong Kong's and other world's markets captured by these two models are testified to be consistent with history, and have meaningful interpretations.

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File URL: http://www.sciencedirect.com/science/article/B6W4F-4WGMB6T-2/2/575f2ff382fdce95f6c43189d58e7339
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Bibliographic Info

Article provided by Elsevier in its journal Global Finance Journal.

Volume (Year): 20 (2009)
Issue (Month): 2 ()
Pages: 137-152

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Handle: RePEc:eee:glofin:v:20:y:2009:i:2:p:137-152

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Web page: http://www.elsevier.com/locate/inca/620162

Related research

Keywords: Multivariate volatility CARR Smooth transition GARCH;

References

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