Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25475
Authors: 
Haas, Markus
Mittnik, Stefan
Paolella, Marc S.
Year of Publication: 
2006
Series/Report no.: 
CFS Working Paper 2006/09
Abstract: 
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.
Subjects: 
Conditional Volatility
Regime-dependent Correlations
Leverage Effect
Multivariate GARCH
Second-order Dependence
JEL: 
C32
C51
G10
G11
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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