Bayesian Analysis of Realized Matrix-Exponential GARCH Models

Tinbergen Institute Discussion Paper 2018-005/III

29 Pages Posted: 25 Jan 2018

See all articles by Manabu Asai

Manabu Asai

Soka University - Faculty of Economics

Michael McAleer

Erasmus University Rotterdam - Erasmus School of Economics, Econometric Institute; Tinbergen Institute; University of Tokyo - Centre for International Research on the Japanese Economy (CIRJE), Faculty of Economics

Date Written: January 17, 2018

Abstract

The paper develops a new realized matrix-exponential GARCH (MEGARCH) model, which uses the information of returns and realized measure of co-volatility matrix simultaneously. The paper also considers an alternative multivariate asymmetric function to develop news impact curves. We consider Bayesian MCMC estimation to allow non-normal posterior distributions. For three US financial assets, we compare the realized MEGARCH models with existing multivariate GARCH class models. The empirical results indicate that the realized MEGARCH models outperform the other models regarding in-sample and out-of-sample performance. The news impact curves based on the posterior densities provide reasonable results.

Keywords: Multivariate GARCH, Realized Measures, Matrix-Exponential, Bayesian Markov Chain Monte Carlo method, Asymmetry

JEL Classification: C11, C32

Suggested Citation

Asai, Manabu and McAleer, Michael, Bayesian Analysis of Realized Matrix-Exponential GARCH Models (January 17, 2018). Tinbergen Institute Discussion Paper 2018-005/III, Available at SSRN: https://ssrn.com/abstract=3103810 or http://dx.doi.org/10.2139/ssrn.3103810

Manabu Asai (Contact Author)

Soka University - Faculty of Economics ( email )

1-236 Tangi-cho
Hachioji (city)
Tokyo, 192-8577
Japan

HOME PAGE: http://www.soka.ac.jp/en/#a01

Michael McAleer

Erasmus University Rotterdam - Erasmus School of Economics, Econometric Institute ( email )

Rotterdam
Netherlands

Tinbergen Institute

Rotterdam
Netherlands

University of Tokyo - Centre for International Research on the Japanese Economy (CIRJE), Faculty of Economics

Tokyo
Japan

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
110
Abstract Views
573
Rank
447,736
PlumX Metrics