Modeling dependence structure in size-sorted portfolios: A Structural Multivariate GARCH Model
AbstractA new model is developed that augments a structural VAR specification with a GARCH covariance matrix. The model is utilised to study time series dependencies between three size-sorted portfolios from the Australian Stock Exchange. Even after accounting for contemporaneous correlations the returns on small and medium firm portfolios are found to lag the large firm portfolio returns. An asymmetric lag structure is also found in the structural variance equations. The evidence is consistent with the Lo and MacKinlay (1990) lead-lag effect and the volatility spill-over hypothesis of Condrad, Gultekin and Kaul (1991).
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Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society 2004 Australasian Meetings with number 55.
Date of creation: 11 Aug 2004
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Heteroschedasticity; Simultaneous Equations; Multivariate GARCH; Size-Sorted Portfolios; Conditional Impulse Responses; Conditional Variance Decomposition;
Find related papers by JEL classification:
- C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-10-30 (All new papers)
- NEP-ECM-2004-10-30 (Econometrics)
- NEP-ETS-2004-10-30 (Econometric Time Series)
- NEP-FIN-2004-10-30 (Finance)
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