IDEAS home Printed from https://ideas.repec.org/p/cor/louvrp/3347.html

Realized covariance models with time-varying parameters and spillover effects

Author

Listed:
  • Bauwens, Luc

    (Université catholique de Louvain, LIDAM/CORE, Belgium)

  • Otranto, Edoardo

    (Sapienza University of Rome)

Abstract

A realized covariance model specifies a dynamic process for a conditional covariance matrix of daily asset returns as a function of past realized variances and covariances. We propose parsimonious parameterizations enabling a spillover effect in the conditional variance equations, and a specific nonlinear, time-varying, effect of the lagged realized covariance between each asset pair on the corresponding conditional covariance. We introduce these parameterizations in four classes of realized covariance models. In an application to the components of the Dow Jones index, we find that the extended models improve the fit of their less flexible scalar versions and show a good out-of-sample forecast performance, in particular for short forecast horizons.

Suggested Citation

  • Bauwens, Luc & Otranto, Edoardo, 2025. "Realized covariance models with time-varying parameters and spillover effects," LIDAM Reprints CORE 3347, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:3347
    DOI: https://doi.org/10.1177/1471082X251324273
    Note: In: Statistical Modelling, 2025
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cor:louvrp:3347. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alain GILLIS (email available below). General contact details of provider: https://edirc.repec.org/data/coreebe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.