Darolles, Serges and Francq, Christian and Laurent, Sébastien
(2018):
*Asymptotics of Cholesky GARCH models and time-varying conditional betas.*

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## Abstract

This paper proposes a new model with time-varying slope coefficients. Our model, called CHAR, is a Cholesky-GARCH model, based on the Cholesky decomposition of the conditional variance matrix introduced by Pourahmadi (1999) in the context of longitudinal data. We derive stationarity and invertibility conditions and prove consistency and asymptotic normality of the Full and equation-by-equation QML estimators of this model. We then show that this class of models is useful to estimate conditional betas and compare it to the approach proposed by Engle (2016). Finally, we use real data in a portfolio and risk management exercise. We find that the CHAR model outperforms a model with constant betas as well as the dynamic conditional beta model of Engle (2016).

Item Type: | MPRA Paper |
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Original Title: | Asymptotics of Cholesky GARCH models and time-varying conditional betas |

Language: | English |

Keywords: | Multivariate-GARCH; conditional betas; covariance |

Subjects: | C - Mathematical and Quantitative Methods > C5 - Econometric Modeling C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics |

Item ID: | 83988 |

Depositing User: | Christian Francq |

Date Deposited: | 22 Jan 2018 06:36 |

Last Modified: | 28 Sep 2019 02:47 |

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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/83988 |