Please use this identifier to cite or link to this item:
http://bura.brunel.ac.uk/handle/2438/8351
Title: | Negative volatility spillovers in the unrestricted ECCC-GARCH model |
Authors: | Conrad, C Karanasos, M |
Keywords: | GARCH model;Volatility feedback;Negative volatility spillovers;Conditional covariance matrix |
Issue Date: | 2010 |
Publisher: | Cambridge University Press |
Citation: | Econometric Theory, 26(3), 838 - 862, 2010 |
Abstract: | This paper considers a formulation of the extended constant or time-varying conditional correlation GARCH model that allows for volatility feedback of either the positive or negative sign. In the previous literature, negative volatility spillovers were ruled out by the assumption that all the parameters of the model are nonnegative, which is a sufficient condition for ensuring the positive definiteness of the conditional covariance matrix. In order to allow for negative feedback, we show that the positive definiteness of the conditional covariance matrix can be guaranteed even if some of the parameters are negative. Thus, we extend the results of Nelson and Cao (1992) and Tsai and Chan (2008) to a multivariate setting. For the bivariate case of order one, we look into the consequences of adopting these less severe restrictions and find that the flexibility of the process is substantially increased. Our results are helpful for the model-builder, who can consider the unrestricted formulation as a tool for testing various economic theories. |
Description: | Copyright @ 2010 Cambridge University Press. |
URI: | http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=7746968 http://bura.brunel.ac.uk/handle/2438/8351 |
DOI: | http://dx.doi.org/10.1017/S0266466609990120 |
ISSN: | 0266-4666 |
Appears in Collections: | Economics and Finance Publications Dept of Economics and Finance Research Papers |
Files in This Item:
File | Description | Size | Format | |
---|---|---|---|---|
Fulltext.pdf | 260.9 kB | Adobe PDF | View/Open |
Items in BURA are protected by copyright, with all rights reserved, unless otherwise indicated.