Arbeitspapier
Negative volatility spillovers in the unrestricted ECCC-GARCH model
This paper considers a formulation of the extended constant or time-varying conditional correlation GARCH model which allows for volatility feedback of either sign, i.e., positive or negative. In the previous literature, negative volatility spillovers were ruled out by the assumption that all the coefficients of the model are non-negative, which is a sufficient condition for ensuring the positive definiteness of the conditional covariance matrix. In order to allow for negative feedback, we show that the positive definiteness of the conditional covariance matrix can be guaranteed even if some of the parameters are negative. Thus, we extend the results of Nelson and Cao (1992) and Tsai and Chan (2008) to a multivariate setting. For the bivariate case of order one we look into the consequences of adopting these less severe restrictions and find that the flexibility of the process is substantially increased. Our results are helpful for the model-builder, who can consider the unrestricted formulation as a tool for testing various economic theories.
- Sprache
-
Englisch
- Erschienen in
-
Series: KOF Working Papers ; No. 189
- Klassifikation
-
Wirtschaft
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Model Construction and Estimation
Model Evaluation, Validation, and Selection
Forecasting Models; Simulation Methods
- Thema
-
Inequality constraints
multivariate GARCH processes
volatility feedback
ARCH-Modell
Volatilität
Spillover-Effekt
Modell-Spezifikation
Theorie
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Conrad, Christian
Karanasos, Menelaos
- Ereignis
-
Veröffentlichung
- (wer)
-
ETH Zurich, KOF Swiss Economic Institute
- (wo)
-
Zurich
- (wann)
-
2008
- DOI
-
doi:10.3929/ethz-a-005552237
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Conrad, Christian
- Karanasos, Menelaos
- ETH Zurich, KOF Swiss Economic Institute
Entstanden
- 2008
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