767 research outputs found
Efficient Bayesian estimation of a multivariate stochastic volatility model with cross leverage and heavy-tailed errors
The efficient Bayesian estimation method using Markov chain Monte Carlo is proposed for a multivariate stochastic volatility model that is a natural extension of the univariate stochastic volatility model with leverage and heavy-tailed errors, where we further incorporate cross leverage effects among stock returns. Our method is based on a multi-move sampler which samples a block of latent volatility vectors and is described first in the literature for a multivariate stochastic volatility model with cross leverage and heavy-tailed errors. Its high sampling efficiency is shown using numerical examples in comparison with a single-move sampler which samples one latent volatility vector at a time given other latent vectors and parameters. The empirical studies are given using five dimensional stock return indices in Tokyo Stock Exchange.
"Efficient Bayesian Estimation of a Multivariate Stochastic Volatility Model with Cross Leverage and Heavy-Tailed Errors"
An efficient Bayesian estimation using a Markov chain Monte Carlo method is proposed in the case of a multivariate stochastic volatility model as a natural extension of the univariate stochastic volatility model with leverage and heavy-tailed errors. Note that we further incorporate cross-leverage effects among stock returns. Our method is based on a multi-move sampler that samples a block of latent volatility vectors. The method is presented as a multivariate stochastic volatility model with cross leverage and heavytailed errors. Its high sampling efficiency is shown using numerical examples in comparison with a single-move sampler that samples one latent volatility vector at a time, given other latent vectors and parameters. To illustrate the method, empirical analyses are provided based on five-dimensional S&P500 sector indices returns.
Efficient Bayesian Estimation of a Multivariate Stochastic Volatility Model with Cross Leverage and Heavy-Tailed Errors
An efficient Bayesian estimation using a Markov chain Monte Carlo method is proposed in the case of a multivariate stochastic volatility model as a natural extension of the univariate stochastic volatility model with leverage and heavy-tailed errors. Note that we further incorporate cross-leverage effects among stock returns. Our method is based on a multi-move sampler that samples a block of latent volatility vectors. The method is presented as a multivariate stochastic volatility model with cross leverage and heavytailed errors. Its high sampling efficiency is shown using numerical examples in comparison with a single-move sampler that samples one latent volatility vector at a time, given other latent vectors and parameters. To illustrate the method, empirical analyses are provided based on five-dimensional S&P500 sector indices returns.
Score driven asymmetric stochastic volatility models
In this paper we propose a new class of asymmetric stochastic volatility (SV) models, which specifies the volatility as a function of the score of the distribution of returns conditional on volatilities based on the Generalized Autoregressive Score (GAS) model. Different specifications of the log-volatility are obtained by assuming different return error distributions. In particular, we consider three of the most popular distributions, namely, the Normal, Student-t and Generalized Error Distribution and derive the statistical properties of each of the corresponding score driven SV models. We show that some of the parameters cannot be property identified by the moments usually considered as to describe the stylized facts of financial returns, namely, excess kurtosis, autocorrelations of squares and cross-correlations between returns and future squared returns. The parameters of some restricted score driven SV models can be estimated adequately using a MCMC procedure. Finally, the new proposed models are fitted to financial returns and evaluated in terms of their in-sample and out-of-sample performanceFinancial support from the Spanish Ministry of Education and Science, research project ECO2012-32401, is acknowledged. The third author is also grateful for project MTM2010-1732
One for all : nesting asymmetric stochastic volatility models
This paper proposes a new stochastic volatility model to represent the dynamic
evolution of conditionally heteroscedastic time series with leverage effect. Although
there are already several models proposed in the literature with the same purpose, our
main justification for a further new model is that it nests some of the most popular
stochastic volatility specifications usually implemented to real time series of financial
returns. We derive closed-form expressions of its statistical properties and,
consequently, of those of the nested specifications. Some of these properties were
previously unknown in the literature although the restricted models are often fitted by
empirical researchers. By comparing the properties of the restricted models, we are able
to establish the advantages and limitations of each of them. Finally, we analyze the
performance of a MCMC estimator of the parameters and volatilities of the new
proposed model and show that, if the error distribution is known, it has appropriate
finite sample properties. Furthermore, estimating the new model using the MCMC
estimator, one can correctly identify the restricted true specifications. All the results are
illustrated by estimating the parameters and volatilities of simulated time series and of a
series of daily S&P500 returnsFinancial support from the Spanish Ministry of Education and Science, research
projects ECO2009-08100 and ECO2012-32401, is acknowledged. The third author is also grateful for
project MTM2010-1732
Introducing shrinkage in heavy-tailed state space models to predict equity excess returns
We forecast S&P 500 excess returns using a flexible Bayesian econometric
state space model with non-Gaussian features at several levels. More precisely,
we control for overparameterization via novel global-local shrinkage priors on
the state innovation variances as well as the time-invariant part of the state
space model. The shrinkage priors are complemented by heavy tailed state
innovations that cater for potential large breaks in the latent states.
Moreover, we allow for leptokurtic stochastic volatility in the observation
equation. The empirical findings indicate that several variants of the proposed
approach outperform typical competitors frequently used in the literature, both
in terms of point and density forecasts
Stochastic volatility forecasting of the Finnish housing market
The purpose of the article is to assess the in-sample fit and the out-of-sample forecasting performances of four stochastic volatility (SV) models in the Finnish housing market. The competing models are the vanilla SV, the SV model where the latent volatility follows a stationary AR(2) process, the heavy-tailed SV and the SV with leverage effects. The models are estimated using Bayesian technique, and the results reveal that the SV with leverage effects is the best model for modelling the Finnish house price volatility. The heavy-tailed SV model provides accurate out-of-sample volatility forecasts in most of the studied regions. Additionally, the modelsā performances are noted to vary across almost all cities and sub-areas, and by apartment types. Moreover, the AR(2) component substantially improves the in-sample fit of the standard SV, but it is unimportant for the out-of-sample forecasting performance. The study outcomes have crucial implications, such as portfolio management and investment decision-making. To establish suitable time-series volatility forecasting models of this housing market, these study outcomes will be compared to the performances of their GARCH models counterparts.fi=vertaisarvioitu|en=peerReviewed
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