
We develop a new method for generating dynamics of conditional correlation matrices of asset returns. These correlation matrices are parameterized by a subset of their partial correlations, whose structure is described by a set of connected trees called “vine”. Partial correlation processes can be specified separately and arbitrarily, providing a new family of very flexible multivariate GARCH processes, called “vine-GARCH” processes. We estimate such models by quasi-maximum likelihood. We compare our models with DCC and GAS-type specifications through simulated experiments and we evaluate their empirical performances.
Time series, auto-correlation, regression, etc. in statistics (GARCH), Measures of association (correlation, canonical correlation, etc.), multivariate GARCH processes, Dynamic Conditional Correlations, Multivariate GARCH, Partial Correlations, Quasi Maximum Likelihood Estimator, Regular vine., Applications of statistics to economics, asset correlations, quasi-maximum likelihood
Time series, auto-correlation, regression, etc. in statistics (GARCH), Measures of association (correlation, canonical correlation, etc.), multivariate GARCH processes, Dynamic Conditional Correlations, Multivariate GARCH, Partial Correlations, Quasi Maximum Likelihood Estimator, Regular vine., Applications of statistics to economics, asset correlations, quasi-maximum likelihood
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