A suggestion for constructing a large time-varying conditional covariance matrix

C-Tier
Journal: Economics Letters
Year: 2017
Volume: 156
Issue: C
Pages: 110-113

Score contribution per author:

0.335 = (α=2.01 / 3 authors) × 0.5x C-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

The construction of large conditional covariance matrices has posed a problem in the empirical literature because the direct extension of the univariate GARCH model to a multivariate setting produces large numbers of parameters to be estimated as the number of equations rises. A number of procedures have previously aimed to simplify the model and restrict the number of parameters, but these procedures typically involve either invalid or undesirable restrictions. This paper suggests an alternative way forward, based on the GARCH approach, which allows conditional covariance matrices of unlimited size to be constructed. The procedure is computationally straightforward to implement. At no point in the procedure is it necessary to estimate anything other than a univariate GARCH model.

Technical Details

RePEc Handle
repec:eee:ecolet:v:156:y:2017:i:c:p:110-113
Journal Field
General
Author Count
3
Added to Database
2026-01-25