This paper develops a generalized autoregressive conditional correlation~GARCC! model when the standardized residuals follow a random coefficient vector autoregressive process+ As a multivariate generalization of the Tsay~1987, Journal of the American Statistical Association 82, 590-604! random coefficient autoregressive~RCA! model, the GARCC model provides a motivation for the conditional correlations to be time varying+ GARCC is also more general than the Engle~2002, Journal of Business & Economic Statistics 20, 339-350! dynamic conditional correlation~DCC! and the Tse and Tsui~2002, Journal of Business & Economic Statistics 20, 351-362! varying conditional correlation~VCC! models and does not impose unduly restrictive conditions on the parameters of the DCC model+ The structural properties of the GARCC model, specifically, the analytical forms of the regularity conditions, are derived, and the asymptotic theory is established+ The Baba, Engle, Kraft, and Kroner~BEKK! model of Engle and Kroner~1995, Econometric Theory 11, 122-150! is demonstrated to be a special case of a multivariate RCA process+ A likelihood ratio test is proposed for several special casesThe authors thank the co-editor, Bruce Hansen, and three referees for insightful suggestions and Manabu Asai,

Various univariate and multivariate models of volatility have been used to evaluate market risk, asymmetric shocks, thresholds, leverage effects, and Value-at-Risk in economics and finance. This article is concerned with market risk, and develops a constant conditional correlation vector ARMA-asymmetric GARCH (VARMA-AGARCH) model, as an extension of the widely used univariate asymmetric (or threshold) GJR model of Glosten et al. (1992), and establishes its underlying structure, including the unique, strictly stationary, and ergodic solution of the model, its causal expansion, and convenient sufficient conditions for the existence of moments. Alternative empirically verifiable sufficient conditions for the consistency and asymptotic normality of the quasi-maximum likelihood estimator are established under non-normality of the standardized shocks.Asymmetric effects, Asymptotic theory, Conditional volatility, Multivariate structure, Regularity conditions,

Country risk has become a topic of major concern for the international financial community over the last two decades. The importance of country ratings is underscored by the existence of several major country risk rating agencies, namely the Economist Intelligence Unit, Euromoney, Institutional Investor, International Country Risk Guide, Moody's, Political Risk Services, and Standard and Poor's. These risk rating agencies employ different methods to determine country risk ratings, combining a range of qualitative and quantitative information regarding alternative measures of economic, financial and political risk into associated composite risk ratings. However, the accuracy of any risk rating agency with regard to any or all of these measures is open to question. For this reason, it is necessary to review the literature relating to empirical country risk models according to established statistical and econometric criteria used in estimation, evaluation and forecasting. Such an evaluation permits a critical assessment of the relevance and practicality of the country risk literature. The paper also provides an international comparison of risk ratings for twelve countries from six geographic regions. These ratings are compiled by the International Country Risk Guide, which is the only rating agency to provide detailed and consistent monthly data over an extended period for a large number of countries. The time series data permit a comparative assessment of the international country risk ratings, and highlight the importance of economic, financial and political risk ratings as components of a composite risk rating.

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Small island tourism economies (SITEs) differ significantly from each other in many respects, such as their size, location, political systems, historical experience, economic prospects, ecological fragility, and vulnerability to ethnic conflicts, crime and the threat of global terrorism. Given these differences, a careful analysis of country risk (or uncertainty) and its components for SITEs is of substantial interest to private tourism operators and foreign direct investors in the tourism and hospitality industry, tourism commissions and governments. This paper provides a comparison of country risk ratings, risk returns and their associated volatilities (or uncertainty) for six SITEs for which monthly data compiled by the International Country Risk Guide are available. Monthly economic, financial, political and composite country risk returns are used to estimate univariate symmetric and asymmetric models of uncertainty. The empirical results provide a comparative assessment of the country risk returns and uncertainty for the six SITEs.