Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/145368
Authors: 
Hansen, Peter Reinhard
Janus, Pawel
Koopman, Siem Jan
Year of Publication: 
2016
Series/Report no.: 
Tinbergen Institute Discussion Paper 16-061/III
Abstract: 
We propose a novel multivariate GARCH model that incorporates realized measures for the variance matrix of returns. The key novelty is the joint formulation of a multivariate dynamic model for outer-products of returns, realized variances and realized covariances. The updating of the variance matrix relies on the score function of the joint likelihood function based on Gaussian and Wishart densities. The dynamic model is parsimonious while each innovation still impacts all elements of the variance matrix. Monte Carlo evidence for parameter estimation based on different small sample sizes is provided. We illustrate the model with an empirical application to a portfolio of 15 U.S. financial assets.
Subjects: 
high-frequency data
multivariate GARCH
multivariate volatility
realised covariance
score
Wishart density
JEL: 
C32
C52
C58
Document Type: 
Working Paper

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