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On the efficiency and consistency of likelihood estimation in multivariate conditionally heteroskedastic dynamic regression models

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  • Gabriele Fiorentini

    ()
    (University of Florence and The Rimini Centre for Economics Analysis, Italy.)

  • Enrique Sentana

    ()
    (CEMFI, Spain)

Abstract

We rank the efficiency of several likelihood-based parametric and semiparametric estimators of conditional mean and variance parameters in multivariate dynamic models with i.i.d. spherical innovations, and show that Gaussian pseudo maximum likelihood estimators are inefficient except under normality. We also provide conditions for partial adaptivity of semiparametric procedures, and relate them to the consistency of distributionally misspecified maximum likelihood estimators. We propose Hausman tests that compare Gaussian pseudo maximum likelihood estimators with more efficient but less robust competitors. We also study the efficiency of sequential estimators of the shape parameters. Finally, we provide finite sample results through Monte Carlo simulations.

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Bibliographic Info

Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 38-07.

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Date of creation: Jul 2007
Date of revision: Jul 2007
Handle: RePEc:rim:rimwps:38-07

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Keywords: Adaptivity; ARCH; Elliptical Distributions; Financial Returns; Hausman tests; Semiparametric Estimators; Sequential Estimators.;

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  2. Enrique SENTANA, 2000. "The Likelihood Function of Conditionally Heteroskedastic Factor Models," Annales d'Economie et de Statistique, ENSAE, issue 58, pages 1-19.
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  11. Fiorentini, Gabriele & Sentana, Enrique & Calzolari, Giorgio, 2004. "On the validity of the Jarque-Bera normality test in conditionally heteroskedastic dynamic regression models," Economics Letters, Elsevier, vol. 83(3), pages 307-312, June.
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  23. Amengual, Dante & Sentana, Enrique, 2010. "A comparison of mean-variance efficiency tests," Journal of Econometrics, Elsevier, vol. 154(1), pages 16-34, January.
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  27. Gloria Gonzalez-Rivera, 1997. "A note on adaptation in garch models," Econometric Reviews, Taylor & Francis Journals, vol. 16(1), pages 55-68.
  28. Sentana, E., 2000. "Factor Representing Portfolios in Large Asset Markets," Papers 0001, Centro de Estudios Monetarios Y Financieros-.
  29. Fiorentini, Gabriele & Sentana, Enrique & Calzolari, Giorgio, 2003. "Maximum Likelihood Estimation and Inference in Multivariate Conditionally Heteroscedastic Dynamic Regression Models with Student t Innovations," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(4), pages 532-46, October.
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