Multivariate Stochastic Volatility Models: Bayesian Estimation and Model Comparison
AbstractIn this paper we show that fully likelihood-based estimation and comparison of multivariate stochastic volatility (SV) models can be easily performed via a freely available Bayesian software called WinBUGS. Moreover, we introduce to the literature several new specifications which are natural extensions to certain existing models, one of which allows for time varying correlation coefficients. Ideas are illustrated by fitting, to a bivariate time series data of weekly exchange rates, nine multivariate SV models, including the specifications with Granger causality in volatility, time varying correlations, heavytailed error distributions, additive factor structure, and multiplicative factor structure. Empirical results suggest that the most adequate specifications are those that allow for time varying correlation coefficients.
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Bibliographic InfoPaper provided by Singapore Management University, School of Economics in its series Working Papers with number 23-2004.
Length: 30 pages
Date of creation: Nov 2004
Date of revision:
Publication status: Published in SMU Economics and Statistics Working Paper Series
Other versions of this item:
- Jun Yu & Renate Meyer, 2006. "Multivariate Stochastic Volatility Models: Bayesian Estimation and Model Comparison," Econometric Reviews, Taylor & Francis Journals, vol. 25(2-3), pages 361-384.
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-14 (All new papers)
- NEP-ECM-2006-10-14 (Econometrics)
- NEP-ETS-2006-10-14 (Econometric Time Series)
- NEP-FIN-2006-10-14 (Finance)
- NEP-SEA-2006-10-14 (South East Asia)
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