Resource title

Multivariate normal mixture GARCH

Resource image

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Resource description

We present a multivariate generalization of the mixed normal GARCH model proposed in Haas, Mittnik, and Paolella (2004a). Issues of parametrization and estimation are discussed. We derive conditions for covariance stationarity and the existence of the fourth moment, and provide expressions for the dynamic correlation structure of the process. These results are also applicable to the single-component multivariate GARCH(p, q) model and simplify the results existing in the literature. In an application to stock returns, we show that the disaggregation of the conditional (co)variance process generated by our model provides substantial intuition, and we highlight a number of findings with potential significance for portfolio selection and further financial applications, such as regime-dependent correlation structures and leverage effects.

Resource author

Markus Haas, Stefan Mittnik, Marc S. Paolella

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/25475

Resource license

Adapt according to the presented license agreement and reference the original author.