Abstract

http://ssrn.com/abstract=1333869
 
 

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A Model for Multivariate Non-Negative Valued Processes in Financial Econometrics


Fabrizio Cipollini


Universita di Firenze, DiSIA (Dipartimento di Statistica, Informatica, Applicazioni)

Robert F. Engle


New York University - Leonard N. Stern School of Business - Department of Economics; New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)

Giampiero M. Gallo


Universita' di Firenze - Dipartimento di Statistica, Informatica, Applicazioni "G.Parenti"

January, 27 2009


Abstract:     
The Multiplicative Error Model for nonnegative valued processes is specified as the product of a (conditionally autoregressive) scale factor and an innovation process with nonnegative support. A multivariate extension allows the innovations to be contemporaneously correlated. The estimation procedure is hindered by the lack of sufficiently flexible probability density functions for such processes. We adopt copula functions to be able to estimate the parameters of the scale factors and of the correlations of the innovation processes. We illustrate the feasibility of the procedure and the gains over the equation by equation approach using a model with different volatility measures.

Number of Pages in PDF File: 38

Keywords: GARCH, MEM, Volatility, Copula, financial time series

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Date posted: January 28, 2009  

Suggested Citation

Cipollini, Fabrizio and Engle, Robert F. and Gallo, Giampiero M., A Model for Multivariate Non-Negative Valued Processes in Financial Econometrics (January, 27 2009). Available at SSRN: http://ssrn.com/abstract=1333869 or http://dx.doi.org/10.2139/ssrn.1333869

Contact Information

Fabrizio Cipollini
Universita di Firenze, DiSIA (Dipartimento di Statistica, Informatica, Applicazioni) ( email )
Viale Morgagni, 59
Florence, Florence 50134
Italy
+39 055 2751592 (Phone)
+39 055 4223560 (Fax)
Robert F. Engle
New York University - Leonard N. Stern School of Business - Department of Economics ( email )
269 Mercer Street
New York, NY 10003
United States
New York University (NYU) - Department of Finance
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Giampiero M. Gallo (Contact Author)
Universita' di Firenze - Dipartimento di Statistica, Informatica, Applicazioni "G.Parenti" ( email )
Viale G.B. Morgagni, 59
Florence, 50134
Italy
0039 055 2751 591 (Phone)
0039 055 4223560 (Fax)
HOME PAGE: http://www.disia.unifi.it/gallog
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