Asymmetric Multivariate Normal Mixture GARCH

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Asymmetric Multivariate Normal Mixture GARCH

Author Info

Markus Haas () (University of Munich, Institute of Statistics)
Stefan Mittnik (Department of Statistics, University of Munich, Center for Financial Studies, Frankfurt, and Ifo Institute for Economic Research, Munich)
Mark S. Paolella (Swiss Banking Institute, University of Zurich, Switzerland)

Abstract

An asymmetric multivariate generalization of the recently proposed class of normal mixture GARCH models is developed. Issues of parametrization and estimation are discussed. Conditions for covariance stationarity and the existence of the fourth moment are derived, and expressions for the dynamic correlation structure of the process are provided. In an application to stock market returns, it is shown that the disaggregation of the conditional (co)variance process generated by the model provides substantial intuition. Moreover, the model exhibits a strong performance in calculating out–of–sample Value–at–Risk measures.

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Paper provided by Center for Financial Studies in its series CFS Working Paper Series with number 2008/07.

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Length: 44 pages
Date of creation: 18 Jan 2008
Date of revision:
Handle: RePEc:cfs:cfswop:wp200807

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-09-05 (All new papers)
NEP-ECM-2008-09-05 (Econometrics)
NEP-ETS-2008-09-05 (Econometric Time Series)
NEP-ORE-2008-09-05 (Operations Research)
NEP-RMG-2008-09-05 (Risk Management)

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