Multivariate Variance Targeting in the BEKK-GARCH Model

34 Pages Posted: 21 Nov 2012

See all articles by Rasmus Pedersen

Rasmus Pedersen

University of Copenhagen - Department of Economics

Anders Rahbek

University of Copenhagen - Department of Statistics and Operations Research; University of Copenhagen - Department of Economics

Date Written: November 14, 2012

Abstract

This paper considers asymptotic inference in the multivariate BEKK model based on (co-)variance targeting (VT). By de…finition the VT estimator is a two-step estimator and the theory presented is based on expansions of the modifi…ed likelihood function, or estimating function, corresponding to these two steps. Strong consistency is established under weak moment conditions, while sixth order moment restrictions are imposed to establish asymptotic normality. Included simulations indicate that the multivariately induced higher order moment constraints are indeed necessary.

Suggested Citation

Pedersen, Rasmus and Rahbek, Anders, Multivariate Variance Targeting in the BEKK-GARCH Model (November 14, 2012). Univ. of Copenhagen Dept. of Economics Discussion Paper No. 12-23, Available at SSRN: https://ssrn.com/abstract=2177967 or http://dx.doi.org/10.2139/ssrn.2177967

Rasmus Pedersen

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

Anders Rahbek (Contact Author)

University of Copenhagen - Department of Statistics and Operations Research

Universitetsparken 5
DK-2100
Denmark
+45 3532 0682 (Phone)

University of Copenhagen - Department of Economics

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

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