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Multivariate Variance Targeting in the BEKK-GARCH Model

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Author Info

  • Rasmus Søndergaard Pedersen

    (University of Copenhagen)

  • Anders Rahbek

    ()
    (University of Copenhagen and CREATES)

Abstract

This paper considers asymptotic inference in the multivariate BEKK model based on (co-)variance targeting (VT). By defi?nition the VT estimator is a two-step estimator and the theory presented is based on expansions of the modifi?ed likelihood function, or estimating function, corresponding to these two steps. Strong consistency is established under weak moment conditions, while sixth order moment restrictions are imposed to establish asymptotic normality. Included simulations indicate that the multivariately induced higher-order moment constraints are indeed necessary.

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Bibliographic Info

Paper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2012-53.

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Length: 33
Date of creation: 14 Nov 2012
Date of revision:
Handle: RePEc:aah:create:2012-53

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Web page: http://www.econ.au.dk/afn/

Related research

Keywords: Covariance targeting; Variance targeting; Multivariate GARCH; BEKK; Asymptotic theory; Time series.;

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References

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  1. LAURENT, Sébastien & ROMBOUTS, Jeroen V. K. & VIOLANTE, Francesco, 2010. "On the forecasting accuracy of multivariate GARCH models," CORE Discussion Papers 2010025, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Christian Francq & Lajos Horváth, 2011. "Merits and Drawbacks of Variance Targeting in GARCH Models," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 9(4), pages 619-656.
  3. Silvennoinen, Annastiina & Teräsvirta, Timo, 2007. "Multivariate GARCH models," Working Paper Series in Economics and Finance 669, Stockholm School of Economics, revised 18 Jan 2008.
  4. Francq, Christian & Zakoian, Jean-Michel, 2010. "QML estimation of a class of multivariate GARCH models without moment conditions on the observed process," MPRA Paper 20779, University Library of Munich, Germany.
  5. Marco Avarucci & Eric Beutner & Paolo Zaffaroni, 2012. "On moment conditions for quasi-maximum likelihood estimation of multivariate ARCH models," DSS Empirical Economics and Econometrics Working Papers Series 2012/1, Centre for Empirical Economics and Econometrics, Department of Statistics, "Sapienza" University of Rome.
  6. Jensen, S ren Tolver & Rahbek, Anders, 2004. "Asymptotic Inference For Nonstationary Garch," Econometric Theory, Cambridge University Press, vol. 20(06), pages 1203-1226, December.
  7. Frédérique Bec & Anders Rahbek, 2004. "Vector equilibrium correction models with non-linear discontinuous adjustments," Econometrics Journal, Royal Economic Society, vol. 7(2), pages 628-651, December.
  8. Bollerslev, Tim, 1987. "A Conditionally Heteroskedastic Time Series Model for Speculative Prices and Rates of Return," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 542-47, August.
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Citations

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Cited by:
  1. Noureldin, Diaa & Shephard, Neil & Sheppard, Kevin, 2014. "Multivariate rotated ARCH models," Journal of Econometrics, Elsevier, vol. 179(1), pages 16-30.
  2. Rasmus Søndergaard Pedersen, 2014. "Targeting estimation of CCC-Garch models with infinite fourth moments," Discussion Papers 14-04, University of Copenhagen. Department of Economics.

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