Multivariate Leverage Effects and Realized Semicovariance GARCH Models

49 Pages Posted: 17 Apr 2018

See all articles by Tim Bollerslev

Tim Bollerslev

Duke University - Finance; Duke University - Department of Economics; National Bureau of Economic Research (NBER)

Andrew J. Patton

Duke University - Department of Economics

Rogier Quaedvlieg

Erasmus University Rotterdam (EUR) - Department of Business Economics

Date Written: April 16, 2018

Abstract

We propose new asymmetric multivariate volatility models. The models exploit estimates of variances and covariances based on the signs of high-frequency returns, measures known as realized semivariances, semicovariances, and semicorrelations, to allow for more nuanced responses to positive and negative return shocks than threshold “leverage effect” terms traditionally used in the literature. Our empirical implementations of the new models, including extensions of widely-used bivariate GARCH pecifications for a number of individual stocks and the aggregate market portfolio as well as larger dimensional dynamic conditional correlation type formulations for a cross-section of individual stocks, provide clear evidence of improved model fit and reveal new and interesting asymmetric joint dynamic dependencies.

Keywords: High-Frequency Data, Realized Volatility, Realized Correlation, Semivariance, Asymmetric Dependence

JEL Classification: C22, C51, C53, C58

Suggested Citation

Bollerslev, Tim and Patton, Andrew J. and Quaedvlieg, Rogier, Multivariate Leverage Effects and Realized Semicovariance GARCH Models (April 16, 2018). Available at SSRN: https://ssrn.com/abstract=3164361 or http://dx.doi.org/10.2139/ssrn.3164361

Tim Bollerslev

Duke University - Finance ( email )

Durham, NC 27708-0120
United States
919-660-1846 (Phone)
919-684-8974 (Fax)

Duke University - Department of Economics

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andrew J. Patton

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

HOME PAGE: http://econ.duke.edu/~ap172/

Rogier Quaedvlieg (Contact Author)

Erasmus University Rotterdam (EUR) - Department of Business Economics ( email )

Netherlands

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