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Particle Filters for Markov-Switching Stochastic-Correlation Models

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  • Gianni Amisano
  • Roberto Casarin

Abstract

This work deals with multivariate stochastic volatility models that account for time-varying stochastic correlation between the observable variables. We focus on the bivariate models. A contribution of the work is to introduce Beta and Gamma autoregressive processes for modelling the correlation dynamics. Another contribution f our work is to allow the parameter of the correlation process to be governed by a Markov-switching process. Finally we propose a simulation-based Bayesian approach, called regularised sequential Monte Carlo. This framework is suitable for on-line estimation and the model selection.

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Bibliographic Info

Paper provided by University of Brescia, Department of Economics in its series Working Papers with number 0814.

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Date of creation: 2008
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Handle: RePEc:ubs:wpaper:0814

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References

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  1. Jose T.A.S. Ferreira & Mark F.J. Steel, 2004. "Bayesian Multivariate Regression Analysis with a New Class of Skewed Distributions," Econometrics, EconWPA 0403001, EconWPA.
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  3. BAUWENS, Luc & LAURENT, Sébastien & ROMBOUTS, Jeroen, 2003. "Multivariate GARCH models: a survey," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2003031, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  6. Engle, Robert, 2002. "Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 20(3), pages 339-50, July.
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  8. Joan Jasiak & R. Sufana & C. Gourieroux, 2005. "The Wishart Autoregressive Process of Multivariate Stochastic Volatility," Working Papers, York University, Department of Economics 2005_2, York University, Department of Economics.
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  10. Joann Jasiak & Christian Gourieroux, 2006. "Autoregressive gamma processes," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 25(2), pages 129-152.
  11. BAUWENS, Luc & LAURENT, Sébastien, 2002. "A new class of multivariate skew densities, with application to GARCH models," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2002020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Jacquier, Eric & Polson, Nicholas G & Rossi, Peter E, 2002. "Bayesian Analysis of Stochastic Volatility Models," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 20(1), pages 69-87, January.
  13. Manabu Asai & Michael McAleer & Jun Yu, 2006. "Multivariate Stochastic Volatility: A Review," Econometric Reviews, Taylor & Francis Journals, vol. 25(2-3), pages 145-175.
  14. Philipov, Alexander & Glickman, Mark E., 2006. "Multivariate Stochastic Volatility via Wishart Processes," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 24, pages 313-328, July.
  15. Asai, Manabu & McAleer, Michael, 2009. "The structure of dynamic correlations in multivariate stochastic volatility models," Journal of Econometrics, Elsevier, vol. 150(2), pages 182-192, June.
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  17. Jun Yu & Renate Meyer, 2004. "Multivariate Stochastic Volatility Models: Bayesian Estimation and Model Comparison," Working Papers 23-2004, Singapore Management University, School of Economics.
  18. Chopin, Nicolas & Pelgrin, Florian, 2004. "Bayesian inference and state number determination for hidden Markov models: an application to the information content of the yield curve about inflation," Journal of Econometrics, Elsevier, vol. 123(2), pages 327-344, December.
  19. Aguilar, Omar & West, Mike, 2000. "Bayesian Dynamic Factor Models and Portfolio Allocation," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 18(3), pages 338-57, July.
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  21. Michael K. Pitt, 2002. "Constructing First Order Stationary Autoregressive Models via Latent Processes," Scandinavian Journal of Statistics, Danish Society for Theoretical Statistics;Finnish Statistical Society;Norwegian Statistical Association;Swedish Statistical Association, vol. 29(4), pages 657-663.
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Citations

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Cited by:
  1. Alessandra Del Boca & Michele Fratianni & Franco Spinelli & Carmine Trecroci, 2009. "The Phillips curve and the Italian lira, 1861-1998," Working Papers, University of Brescia, Department of Economics 0908, University of Brescia, Department of Economics.
  2. Alessandro Fedele & Raffaele Miniaci, 2009. "Do social enterprises finance their investments differently from for-profit firms? The case of social residential services in Italy," Working Papers, University of Brescia, Department of Economics 0911, University of Brescia, Department of Economics.
  3. Martin Meier & Enrico Minelli & Herakles Polemarchakis, 2009. "Competitive Markets with Private Information on Both Sides," Working Papers, University of Brescia, Department of Economics 0917, University of Brescia, Department of Economics.
  4. Monica Billio & Roberto Casarin, 2010. "Bayesian Estimation of Stochastic-Transition Markov-Switching Models for Business Cycle Analysis," Working Papers, University of Brescia, Department of Economics 1002, University of Brescia, Department of Economics.
  5. Alessandro Fedele & Paolo Panteghini & Sergio Vergalli, 2010. "Optimal Investment and Financial Strategies under Tax Rate Uncertainty," CESifo Working Paper Series 3017, CESifo Group Munich.
  6. Christian M. Hafner & Hans Manner, 2012. "Dynamic stochastic copula models: estimation, inference and applications," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(2), pages 269-295, 03.
  7. Rosella Levaggi & Francesco Menoncin, 2009. "Decentralized provision of merit and impure public goods," Working Papers, University of Brescia, Department of Economics 0909, University of Brescia, Department of Economics.
  8. Bisin, A. & Geanakoplos, J.D. & Gottardi, P. & Minelli, E. & Polemarchakis, H., 2011. "Markets and contracts," Journal of Mathematical Economics, Elsevier, vol. 47(3), pages 279-288.
  9. Francesco Menoncin & Paolo Panteghini, 2009. "Retrospective Capital Gains taxation in the real world," Working Papers, University of Brescia, Department of Economics 0910, University of Brescia, Department of Economics.
  10. Alessandro Fedele & Francesco Liucci & Andrea Mantovani, 2009. "Credit availability in the crisis: the European investment bank group," Working Papers, University of Brescia, Department of Economics 0913, University of Brescia, Department of Economics.
  11. Roberto Casarin & Marco Tronzano & Domenico Sartore, 2013. "Bayesian Markov Switching Stochastic Correlation Models," Working Papers 2013:11, Department of Economics, University of Venice "Ca' Foscari".

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