Francq, Christian and Sucarrat, Genaro (2015): EquationbyEquation Estimation of a Multivariate LogGARCHX Model of Financial Returns.

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Abstract
Estimation of large financial volatility models is plagued by the curse of dimensionality: As the dimension grows, joint estimation of the parameters becomes infeasible in practice. This problem is compounded if covariates or conditioning variables (``X") are added to each volatility equation. In particular, the problem is especially acute for nonexponential volatility models (e.g. GARCH models), since there the variables and parameters are restricted to be positive. Here, we propose an estimator for a multivariate logGARCHX model that avoids these problems. The model allows for feedback among the equations, admits several stationary regressors as conditioning variables in the Xpart (including leverage terms), and allows for timevarying covariances of unknown form. Strong consistency and asymptotic normality of an equationbyequation least squares estimator is proved, and the results can be used to undertake inference both within and across equations. The flexibility and usefulness of the estimator is illustrated in two empirical applications.
Item Type:  MPRA Paper 

Original Title:  EquationbyEquation Estimation of a Multivariate LogGARCHX Model of Financial Returns 
English Title:  EquationbyEquation Estimation of a Multivariate LogGARCHX Model of Financial Returns 
Language:  English 
Keywords:  Exponential GARCH, multivariate logGARCHX, VARMAX, EquationbyEquation Estimation (EBEE), Least Squares 
Subjects:  C  Mathematical and Quantitative Methods > C1  Econometric and Statistical Methods and Methodology: General > C13  Estimation: General C  Mathematical and Quantitative Methods > C2  Single Equation Models ; Single Variables > C22  TimeSeries Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes C  Mathematical and Quantitative Methods > C3  Multiple or Simultaneous Equation Models ; Multiple Variables > C32  TimeSeries Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C51  Model Construction and Estimation C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C58  Financial Econometrics 
Item ID:  67140 
Depositing User:  Dr. Genaro Sucarrat 
Date Deposited:  09 Oct 2015 18:12 
Last Modified:  30 Sep 2019 13:32 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/67140 