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GO-GARCH: a multivariate generalized orthogonal GARCH model

Author

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  • Roy van der Weide

    (Department of Economics, CeNDEF, University of Amsterdam, Roetersstraat 11, 1018 WB Amsterdam, The Netherlands)

Abstract

Multivariate GARCH specifications are typically determined by means of practical considerations such as the ease of estimation, which often results in a serious loss of generality. A new type of multivariate GARCH model is proposed, in which potentially large covariance matrices can be parameterized with a fairly large degree of freedom while estimation of the parameters remains feasible. The model can be seen as a natural generalization of the O-GARCH model, while it is nested in the more general BEKK model. In order to avoid convergence difficulties of estimation algorithms, we propose to exploit unconditional information first, so that the number of parameters that need to be estimated by means of conditional information is more than halved. Both artificial and empirical examples are included to illustrate the model. Copyright © 2002 John Wiley & Sons, Ltd.

Suggested Citation

  • Roy van der Weide, 2002. "GO-GARCH: a multivariate generalized orthogonal GARCH model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(5), pages 549-564.
  • Handle: RePEc:jae:japmet:v:17:y:2002:i:5:p:549-564
    DOI: 10.1002/jae.688
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    File URL: http://qed.econ.queensu.ca:80/jae/2002-v17.5/
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    References listed on IDEAS

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