Modeling conditional correlations of asset returns : a smooth transition approach
Silvennoinen, Annastiina & Terasvirta, Timo (2015) Modeling conditional correlations of asset returns : a smooth transition approach. Econometric Reviews, 34(1-2), pp. 174-197.
In this paper we propose a new multivariate GARCH model with time-varying conditional correlation structure. The time-varying conditional correlations change smoothly between two extreme states of constant correlations according to a predetermined or exogenous transition variable. An LM–test is derived to test the constancy of correlations and LM- and Wald tests to test the hypothesis of partially constant correlations. Analytical expressions for the test statistics and the required derivatives are provided to make computations feasible. An empirical example based on daily return series of five frequently traded stocks in the S&P 500 stock index completes the paper.
Impact and interest:
Citation counts are sourced monthly from and citation databases.
These databases contain citations from different subsets of available publications and different time periods and thus the citation count from each is usually different. Some works are not in either database and no count is displayed. Scopus includes citations from articles published in 1996 onwards, and Web of Science® generally from 1980 onwards.
Citations counts from theindexing service can be viewed at the linked Google Scholar™ search.
|Item Type:||Journal Article|
|Additional Information:||Special Issue: Econometrics with Theory: A Special Issue Honoring William A. Barnett|
|Keywords:||Constant conditional correlation, Dynamic conditional correlation, Multivariate GARCH, Return comovement, Variable correlation GARCH model, Volatility model evaluation, C12, C32, C51, C52, G1|
|Divisions:||Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
|Copyright Owner:||Copyright 2014 Taylor & Francis Group, LLC|
|Deposited On:||12 Nov 2014 00:06|
|Last Modified:||13 Nov 2014 04:02|
Repository Staff Only: item control page