Modelling Realized Covariances
AbstractThis paper proposes a new dynamic model of realized covariance (RCOV) matrices based on recent work in time-varying Wishart distributions. The specifications can be linked to returns for a joint multivariate model of returns and covariance dynamics that is both easy to estimate and forecast. Realized covariance matrices are constructed for 5 stocks using high-frequency intraday prices based on positive semi-definite realized kernel estimates. We extend the model to capture the strong persistence properties in RCOV. Out-of-sample performance based on statistical and economic metrics show the importance of this. We discuss which features of the model are necessary to provide improvements over a traditional multivariate GARCH model that only uses daily returns.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-382.
Length: 29 pages
Date of creation: 10 Nov 2009
Date of revision:
Contact details of provider:
Postal: 150 St. George Street, Toronto, Ontario
Phone: (416) 978-5283
eigenvalues; dynamic conditional correlation; predictive likelihoods; MCMC;
Find related papers by JEL classification:
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-14 (All new papers)
- NEP-ECM-2009-11-14 (Econometrics)
- NEP-ETS-2009-11-14 (Econometric Time Series)
- NEP-FOR-2009-11-14 (Forecasting)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Stahl, Gerhard & Wang, Shaohui & Wendt, Markus, 2011. "Validate Correlation of an ESG: Treasury Yields across," Diskussionspapiere der Wirtschaftswissenschaftlichen FakultÃ¤t der Leibniz UniversitÃ¤t Hannover dp-476, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
- Golosnoy, Vasyl & Gribisch, Bastian & Liesenfeld, Roman, 2012. "The conditional autoregressive Wishart model for multivariate stock market volatility," Journal of Econometrics, Elsevier, vol. 167(1), pages 211-223.
- Torben G. Andersen & Tim Bollerslev & Peter F. Christoffersen & Francis X. Diebold, 2011.
"Financial Risk Measurement for Financial Risk Management,"
PIER Working Paper Archive
11-037, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
- Torben G. Andersen & Tim Bollerslev & Peter F. Christoffersen & Francis X. Diebold, 2012. "Financial Risk Measurement for Financial Risk Management," NBER Working Papers 18084, National Bureau of Economic Research, Inc.
- Torben G. Andersen & Tim Bollerslev & Peter F. Christoffersen & Francis X. Diebold, 2011. "Financial Risk Measurement for Financial Risk Management," CREATES Research Papers 2011-37, School of Economics and Management, University of Aarhus.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RePEc Maintainer).
If references are entirely missing, you can add them using this form.