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Robust estimation of the simplified multivariate GARCH model

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  • Farhat Iqbal

Abstract

In this paper, robust M-estimation of multivariate GARCH models are considered. The simplified GARCH model is chosen that involves the estimation of only univariate GARCH models, and hence easy to estimate, and does not put additional constraints on the model. The results of Monte Carlo simulations showed that accurate estimates of conditional correlations can be obtained using these robust estimators when the errors are heavy-tailed. We also investigate the forecasting performance of the class of robust estimators in predicting value-at-risk using various evaluation measures and collect empirical evidences of the better predictive potential of estimators such as LAD and B-estimator over the widely-used quasi-maximum likelihood estimator for the estimation and prediction of multivariate GARCH models. Applications to real data sets are also presented. Copyright Springer-Verlag 2013

Suggested Citation

  • Farhat Iqbal, 2013. "Robust estimation of the simplified multivariate GARCH model," Empirical Economics, Springer, vol. 44(3), pages 1353-1372, June.
    • Handle: RePEc:spr:empeco:v:44:y:2013:i:3:p:1353-1372
    DOI: 10.1007/s00181-012-0588-y
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    More about this item

    Keywords

    Multivariate GARCH; QMLE; M-estimator; Value-at-risk; SGARCH; C5;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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