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Dynamic Conditional Correlation with Elliptical Distributions

  • Matteo M. Pelagatti

    (University of Milan-Bicocca)

  • Stefania Rondena

    (University of Milan-Bicocca)

The Dynamic Conditional Correlation model of Engle has made the estimation of multivariate GARCH models feasible for reasonably big vectors of securities’ returns. In the present paper we show how Engle’s twosteps estimate of the model can be easily extended to elliptical conditional distributions and apply different leptokurtic DCC models to some stocks listed at the Milan Stock Exchange. A free software written by the authors to carry out all the required computations is presented as well.

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Paper provided by EconWPA in its series Econometrics with number 0503007.

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Length: 11 pages
Date of creation: 11 Mar 2005
Date of revision:
Handle: RePEc:wpa:wuwpem:0503007
Note: Type of Document - pdf; pages: 11. Presented at the 2nd OxMetrics User Conference, London, August 2004.
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  1. White,Halbert, 1996. "Estimation, Inference and Specification Analysis," Cambridge Books, Cambridge University Press, number 9780521574464.
  2. Engle, Robert, 2002. "Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 339-50, July.
  3. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(01), pages 122-150, February.
  4. Bollerslev, Tim & Engle, Robert F & Wooldridge, Jeffrey M, 1988. "A Capital Asset Pricing Model with Time-Varying Covariances," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 116-31, February.
  5. Bollerslev, Tim, 1990. "Modelling the Coherence in Short-run Nominal Exchange Rates: A Multivariate Generalized ARCH Model," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 498-505, August.
  6. Newey, Whitney K. & McFadden, Daniel, 1986. "Large sample estimation and hypothesis testing," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 36, pages 2111-2245 Elsevier.
  7. Robert F. Engle & Kevin Sheppard, 2001. "Theoretical and Empirical properties of Dynamic Conditional Correlation Multivariate GARCH," NBER Working Papers 8554, National Bureau of Economic Research, Inc.
  8. repec:cup:etheor:v:11:y:1995:i:1:p:122-50 is not listed on IDEAS
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