On the multivariate EGARCH model

Abstract

In this aticle, the extension of Nelson's (1991) univariate EGARCH model to the multivariate version has been reexamined and compared with the existing one given by Koutmos and Booth (1995). The magnitude and sign of standardized innovations have been constrained in Koutmos and Booth's multivariate EGARCH model, but not in the actual multivariate EGARCH model. The constraints imposed on Koutmos and Booth's EGARCH model may lead to inaccurate parameter estimates. Since the actual multivariate EGARCH model obtained is more general, and can produce more accurate inferential results, we suggest that the actual multivariate EGARCH model be used in future financial empirical studies.

The Influence of Domestic and Foreign Shocks on Portfolio Diversification Gains and the Associated Risks

“…The volatility shocks from the country i or j stock markets, derived following Jane and Ding (2009), are nested in Equation 3:…”

“…On the other hand, the asymmetric effects of standardized innovations from the stock markets i and j are measured by partial derivatives for f i and f j from Equations (5) and (6) respectively (Jane and Ding 2009). The leverage effect associated with market i, for instance, is measured by the ratio…”

Asymetryczny wpływ dodatnich i ujemnych stóp zwrotu na zmienność w przypadku rynków Stanów Zjednoczonych, Polski, Czech i Węgier: podejście oparte na modelu EGARCH

“…In (Koutmos, Booth, 1995) the transmission mechanism of price and volatility spillovers across the New York, Tokyo and London stock markets from three different time zones is investigated, using the EGARCH approach. Jane and Ding (2009) propose the multivariate extension of Nelson's univariate EGARCH model and compare their model with the existing one given by Koutmos and Booth (1995). Booth et al (1997) provide the evidence on price and volatility spillovers among four Scandinavian (Nordic) stock markets.…”

“…is an i.i.d. random sequence with mean zero (Jane, Ding, 2009). For 0 < θ the future conditional variances will increase proportionally more as a result of a negative shock than for a positive shock of the same absolute magnitude (Bollerslev, Mikkelsen, 1996)…”

Borsa İstanbul-100 Endeksi̇ni̇n Yi̇yecek-İçecek Sektörü Endeksi̇ Ve Teknoloji̇ Sektörü Endeksi̇ Karşisindaki̇ Volati̇li̇tesi̇

“…Nelson (1991) submitted an other option to GARCH models by alternating GARCH to exponential GARCH (EGARCH). He introduced the exponential GARCH (EGARCH) model as an effort to acquire the asymmetric effect of renewals on volatility, based on which a lot of tentative researchs have come up (Jane & Ding, 2009). Unlike GARCH, EGARCH is not in need of non-equal limitations on parameters to undertake a positive variance (Lee & Brorsen, 1997).…”