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http://hdl.handle.net/10419/32175
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| Title: | | Dynamic modeling of large dimensional covariance matrices  |
| Authors: | | Voev, Valeri |
| Issue Date: | | 2007 |
| Series/Report no.: | | Discussion paper series // Zentrum für Finanzen und Ökonometrie, Universität Konstanz 2007,01 |
| Abstract: | | Modelling and forecasting the covariance of financial return series has always been a challenge due to the so-called curse of dimensionality. This paper proposes a methodology that is applicable in large dimensional cases and is based on a time series of realized covariance matrices. Some solutions are also presented to the problem of non-positive definite forecasts. This methodology is then compared to some traditional models on the basis of its forecasting performance employing Diebold-Mariano tests. We show that our approach is better suited to capture the dynamic features of volatilities and covolatilities compared to the sample covariance based models. |
| Document Type: | | Working Paper |
| Appears in Collections: | | CoFE-Diskussionspapiere, Universität Konstanz
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