Search

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jeconom.2005.06.023 Byline: Hiroyuki Kawakatsu Abstract: I propose a new multivariate GARCH specification that maintains positive definiteness of the conditional covariance matrix. The idea is to specify the dynamics in the matrix logarithm of the conditional covariance. Because the matrix exponential transformation ensures positive definiteness, the dynamics can be specified without the positive definiteness constraint. This affords a variety of specifications and, in particular, we can specify element-by-element the dynamics of the matrix logarithm. I discuss specifications with leverage effects, estimation with multivariate Gaussian and t-distributions, and diagnostics that evaluate the appropriateness of the matrix exponential specification. Author Affiliation: School of Management and Economics, 25 University Square, Queen's University, Belfast, Belfast BT7 1NN, Northern Ireland

This paper evaluates the information content in daily volatility measures that utilize OHLC (Open‐High‐Low‐Close) price data. An encompassing regression framework is used to evaluate the absolute and relative information contain in such measures. 2‐step GMM (generalized method of moments) estimates using two sets of instruments are used to address potential bias from measurement errors. The evidence using S&P 500 index data suggest that volatility measures that use OHLC data encompass those based only on close‐to‐close returns or high‐minus‐low ranges. However, the proposed instruments do not all pass statistical tests of instrument validity and the identification robust confidence set can be quite large. [ABSTRACT FROM AUTHOR]

This paper considers a class of multivariate ARCH models with scalar weights. A new specification with hyperbolic weighted moving average (HWMA) is proposed as an analogue of the EWMA model. Despite the restrictive dynamics of a scalar weight model, the proposed model has a number of advantages that can deal with the curse of dimensionality. The empirical application illustrates that the (pseudo) out-of-sample multistep forecasts can be surprisingly more accurate than those from the DCC model. [ABSTRACT FROM AUTHOR]

This paper examines the performance of iterated and direct forecasts for the number of shares traded in high-frequency intraday data. Constructing direct forecasts in the context of formulating volume weighted average price trading strategies requires the generation of a sequence of multistep-ahead forecasts. I discuss nonlinear transformations to ensure nonnegative forecasts and lag length selection for generating a sequence of direct forecasts. In contrast to the literature based on low-frequency macroeconomic data, I find that direct multiperiod forecasts can outperform iterated forecasts when the conditioning information set is dynamically updated in real time. [ABSTRACT FROM AUTHOR]

Presents a study which examined the effect of economic and financial liberalization on the predictability of real stock returns in emerging markets. Investigation on the time series properties before and after financial liberalization; Difference between economic and financial liberalization; Methodology of the study; Importance of asset allocation models development.