Arbeitspapier
Copula-based dynamic conditional correlation multiplicative error processes
We introduce a copula-based dynamic model for multivariate processes of (non-negative) high-frequency trading variables revealing time-varying conditional variances and correlations. Modeling the variables' conditional mean processes using a multiplicative error model we map the resulting residuals into a Gaussian domain using a Gaussian copula. Based on high-frequency volatility, cumulative trading volumes, trade counts and market depth of various stocks traded at the NYSE, we show that the proposed copula-based transformation is supported by the data and allows capturing (multivariate) dynamics in higher order moments. The latter are modeled using a DCC-GARCH specification. We suggest estimating the model by composite maximum likelihood which is sufficiently flexible to be applicable in high dimensions. Strong empirical evidence for time-varying conditional (co-)variances in trading processes supports the usefulness of the approach. Taking these higher-order dynamics explicitly into account significantly improves the goodness-of-fit of the multiplicative error model and allows capturing time-varying liquidity risks.
- Sprache
-
Englisch
- Erschienen in
-
Series: CFS Working Paper ; No. 2013/19
- Klassifikation
-
Wirtschaft
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Financial Econometrics
Specific Distributions; Specific Statistics
- Thema
-
multiplicative error model
trading processes
copula
DCC-GARCH
liquidity risk
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Bodnar, Taras
Hautsch, Nikolaus
- Ereignis
-
Veröffentlichung
- (wer)
-
Goethe University Frankfurt, Center for Financial Studies (CFS)
- (wo)
-
Frankfurt a. M.
- (wann)
-
2013
- Handle
- URN
-
urn:nbn:de:hebis:30:3-324967
- Letzte Aktualisierung
-
10.03.2025, 11:45 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Bodnar, Taras
- Hautsch, Nikolaus
- Goethe University Frankfurt, Center for Financial Studies (CFS)
Entstanden
- 2013
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