Identification, Estimation And Testing Of Conditionally Heteroskedastic Factor Models

On April 18, 2001 US Federal Reserve Open Market Committee (FOMC) surprised …nancial markets by lowering the Federal Funds Target rate 1 2 % between regularly scheduled FOMC meeting dates. Securities markets in the US and Australia responded. The US 30-Euro$ rate fell by 1 2 %.and US and Australian …ve year bond yields fell by about 13 basis points. Equity returns increased by 3% in the US and 1 1 2 % in Australia. This paper is the …rst to examine international monetary policy surprise spillovers and to estimate the response of security prices to unobservable monetary and nonmonetary surprises.Our estimates of the impact of domestic monetary policy surprises on domestic yields and returns are similar to other studies. The following results are new. US monetary policy surprises spill over and a¤ect Australian yields and equity returns. Australian monetary surprises do not spill over to the US. Nonmonetary surprises are more important in explaining the movements in longer maturity yields and returns than monetary policy surprises.

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“…(1994), Chapter 14; see also Sentana and Fiorentini (2001) who discuss the estimation of factor models in the presence of heteroskedasticity.…”

Section: Moment Conditionsmentioning

confidence: 99%

International monetary policy surprise spillovers

Craine

Martin

2008

Journal of International Economics

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“…. , k. In any case, note that in principle there is no need to set to zero the strict upper triangle of the factor loading matrix C in view of the identiÞcation results in Sentana and Fiorentini (2001).…”

Section: Simulated Em Algorithmmentioning

confidence: 99%

“…In order to compare the performance of the different MCMC samplers introduced in the previous subsections, we have generated realizations of size T = 240 of the GLS factor representing portfolios that would correspond to the trivariate single factor models analyzed by Monte Carlo methods in Sentana and Fiorentini (2001). These authors set λ = 1, c=(1, 1, 1) 0 , and Γ=γI 3 , with γ = 2 or 1/2, corresponding to low and high signal to noise ratios.…”

Section: A Comparison Of the Different Simulatorsmentioning

confidence: 99%

Likelihood-Based Estimation of Latent Generalized ARCH Structures

Fiorentini¹,

Sentana²,

Shephard³

2004

Econometrica

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GARCH models are commonly used as latent processes in econometrics, Þnancial economics and macroeconomics. Yet no exact likelihood analysis of these models has been provided so far. In this paper we outline the issues and suggest a Markov chain Monte Carlo algorithm which allows the calculation of a classical estimator via the simulated EM algorithm or a Bayesian solution in O(T ) computational operations, where T denotes the sample size. We assess the performance of our proposed algorithm in the context of both artiÞcial examples and an empirical application to 26 UK sectorial stock returns, and compare it to existing approximate solutions.

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“…(2004)) satisfy these objectives under an appropriate trimming sequence. 15 . Assumptions (A4-5) are useful in obtaining bias expansions for the components of a nonparametric expectations estimator.…”

Section: A7mentioning

confidence: 99%

Estimating a class of triangular simultaneous equations models without exclusion restrictions

Klein¹,

Vella²

2005

Working Paper Series

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Estimating a Class of Triangular Simultaneous Equations Models without Exclusion RestrictionsRoger Klein Francis Vella The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. ABSTRACT Estimating a Class of Triangular Simultaneous Equations Models Without Exclusion Restrictions *This paper provides a control function estimator to adjust for endogeneity in the triangular simultaneous equations model where there are no available exclusion restrictions to generate suitable instruments. Our approach is to exploit the dependence of the errors on exogenous variables (e.g. heteroscedasticity) to adjust the conventional control function estimator. The form of the error dependence on the exogenous variables is subject to restrictions, but is not parametrically specified. In addition to providing the estimator and deriving its large-sample properties, we present simulation evidence which indicates the estimator works well. JEL Classification:C14, C30

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Identification, Estimation And Testing Of Conditionally Heteroskedastic Factor Models

Cited by 52 publications

References 37 publications

International monetary policy surprise spillovers

International monetary policy surprise spillovers

Likelihood-Based Estimation of Latent Generalized ARCH Structures

Estimating a class of triangular simultaneous equations models without exclusion restrictions

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