A Multivariate GARCH Model with Time-Varying correlations

In this paper we propose a new multivariate GARCH model with time- varying correlations. We adopt the vech representation based on the conditional variances and the conditional correlations. While each conditional-variance term is assumed to follow a univariate GARCH formulation, the conditional-correlation matrix is postulated to follow an autoregressive moving average type of analogue. By imposing some suitable restrictions on the conditional-correlation-matrix equation, we construct a MGARCH model in which the conditional-correlation matrix is guaranteed to be positive definite during the optimisation. Thus, our new model retains the intuition and interpretation of the univariate GARCH model and yet satisfies the positive-definite condition as found in the constant-correlation and BEKK models. We report some Monte Carlo results on the finite-sample distributions of the MLE of the varying- correlation MGARCH model. The new model is applied to some real data sets. It is found that extending the constant-correlation model to allow for time-varying correlations provides some interesting time histories that are not available in a constant-correlation model.BEKK model, constant correlation, Monte Carlo method, multivariate GARCH model, maximum likelihood estimate, varying correlation

Tests of Functional Form and Heteroscedasticity

This paper considers tests of misspecification in a heteroscedastic transformation model. We derive Lagrange multiplier (LM) statistics for (i) testing functional form and heteroscedasticity jointly, (ii) testing functional form in the presence of heteroscedasticity, and (iii) testing heteroscedasticity in the presence of data transformation. We present LM statistics based on the expected information matrix. For cases (i) and (ii), this is done assuming the Box-Cox transformation. For case (iii), the test does not depend on whether the functional form is estimated or pre-specified. Small-sample properties of the tests are assessed by Monte Carlo simulation, and comparisons are made with the likelihood ratio test and other versions of LM test. The results show that the expected-information based LM test has the most appropriate finite-sample empirical siFunctional Form, Hetersocedasticity, Lagrange Multiplier Test

Exchange-Rate Systems and Interest-Rate Behaviour: The Experience of Hong Kong and Singapore

The Currency Board System in Hong Kong and the monitoring band system in Singapore are important benchmarks for two different exchange-rate systems. In this paper we consider the implications of the two exchange-rate systems on the interest-rate behaviour of the two economies. We examine the domestic-US interest differentials under the two exchange-rate regimes during the Asian Financial Crisis as well as the pre- and post-crisis periods. Using a bivariate generalized autoregressive conditional heteroscedasticity model, we also investigate whether there is any change in the correlation between the domestic and US interest rates due to the Asian Financial Crisis.

Tests of Functional Form and Heteroscedasticity

This paper considers tests of misspecification in a heteroscedastic transformation model. We derive Lagrange multiplier (LM) statistics for (i) testing functional form and heteroscedasticity jointly, (ii) testing functional form in the presence of heteroscedasticity, and (iii) testing heteroscedasticity in the presence of data transformation. We present LM statistics based on the expected information matrix. For cases (i) and (ii), this is done assuming the Box-Cox transformation. For case (iii), the test does not depend on whether the functional form is estimated or pre-specified. Small-sample properties of the tests are assessed by Monte Carlo simulation, and comparisons are made with the likelihood ratio test and other versions of LM test. The results show that the expected-information based LM test has the most appropriate finite-sample empirical sizeFunctional Form, Heterscedasticity, Lagrange Multiplier Test

Risk perception and decision making in the supply chain: theory and practice

For over sixty years, academics and practitioners from different backgrounds, including psychology, sociology, and management, have studied the perception of risk and how different decision making affects daily life and business activities. Although it is almost six hundred years since Machiavelli stressed the importance of calculation of risk and effective response to it, approaches to risk measurement and assessment, and to decision making in risky situations, continue to develop and evolve. In the business world, managers strive to find ways to understand how different internal and external factors influence risk, how to judge and interpret the available evidence on the possibility of loss, and how to take individual actions to manage the risk (Slovic 2000). In this decade, a number of risk management frameworks (e.g. IS031000) have been proposed and employed in different areas. These frameworks provide foundations and building blocks for managers to collect available data to analyse risk. Most importantly, such frameworks allow managers to gather knowledge intellectually, to properly judge their experience and to assess the current situation, so as to enter into the most appropriate decision

A Multivariate Generalized Autoregressive Conditional Heteroscedasticity Model with Time-Varying Correlations

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How Many Muscles? Optimal Muscles Set Search for Optimizing Myocontrol Performance

In myo-control, for computational and setup constraints, the measurement of a high number of muscles is not always possible: the choice of the muscle set to use in a myo-control strategy depends on the desired application scope and a search for a reduced muscle set, tailored to the application, has never been performed. The identification of such set would involve finding the minimum set of muscles whose difference in terms of intention detection performance is not statistically significant when compared to the original set. Also, given the intrinsic sensitivity of muscle synergies to variations of EMG signals matrix, the reduced set should not alter synergies that come from the initial input, since they provide physiological information on motor coordination. The advantages of such reduced set, in a rehabilitation context, would be the reduction of the inputs processing time, the reduction of the setup bulk and a higher sensitivity to synergy changes after training, which can eventually lead to modifications of the ongoing therapy. In this work, the existence of a minimum muscle set, called optimal set, for an upper-limb myoelectric application, that preserves performance of motor activity prediction and the physiological meaning of synergies, has been investigated. Analyzing isometric contractions during planar reaching tasks, two types of optimal muscle sets were examined: a subject-specific one and a global one. The former relies on the subject-specific movement strategy, the latter is composed by the most recurrent muscles among subjects specific optimal sets and shared by all the subjects. Results confirmed that the muscle set can be reduced to achieve comparable hand force estimation performances. Moreover, two types of muscle synergies namely “Pose-Shared” (extracted from a single multi-arm-poses dataset) and “Pose-Related” (clustering pose-specific synergies), extracted from the global optimal muscle set, have shown a significant similarity with full-set related ones meaning a high consistency of the motor primitives. Pearson correlation coefficients assessed the similarity of each synergy. The discovering of dominant muscles by means of the optimization of both muscle set size and force estimation error may reveal a clue on the link between synergistic patterns and the force task

Tissue-specific transcriptome assemblies of the marine medaka Oryzias melastigma and comparative analysis with the freshwater medaka Oryzias latipes

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