Analysis of high dimensional multivariate stochastic volatility models
This paper is concerned with the Bayesian estimation and comparison of flexible, high dimensional multivariate time series models with time varying correlations. The model proposed and considered here combines features of the classical factor model with that of the heavy tailed univariate stochastic...
| Main Authors: | , , |
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| Format: | Journal article |
| Language: | English |
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2006
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| Subjects: |
| _version_ | 1826301727352029184 |
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| author | Chib, S Nardari, F Shephard, N |
| author_facet | Chib, S Nardari, F Shephard, N |
| author_sort | Chib, S |
| collection | OXFORD |
| description | This paper is concerned with the Bayesian estimation and comparison of flexible, high dimensional multivariate time series models with time varying correlations. The model proposed and considered here combines features of the classical factor model with that of the heavy tailed univariate stochastic volatility model. A unified analysis of the model, and its special cases, is developed that encompasses estimation, filtering and model choice. The centerpieces of the estimation algorithm (which relies on MCMC methods) are: (1) a reduced blocking scheme for sampling the free elements of the loading matrix and the factors and (2) a special method for sampling the parameters of the univariate SV process. The resulting algorithm is scalable in terms of series and factors and simulation-efficient. Methods for estimating the log-likelihood function and the filtered values of the time-varying volatilities and correlations are also provided. The performance and effectiveness of the inferential methods are extensively tested using simulated data where models up to 50 dimensions and 688 parameters are fit and studied. The performance of our model, in relation to various multivariate GARCH models, is also evaluated using a real data set of weekly returns on a set of 10 international stock indices. We consider the performance along two dimensions: the ability to correctly estimate the conditional covariance matrix of future returns and the unconditional and conditional coverage of the 5% and 1% value-at-risk (VaR) measures of four pre-defined portfolios. |
| first_indexed | 2024-03-07T05:36:44Z |
| format | Journal article |
| id | oxford-uuid:e4267141-1297-40cc-9ec4-42ba546ada3e |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T05:36:44Z |
| publishDate | 2006 |
| record_format | dspace |
| spelling | oxford-uuid:e4267141-1297-40cc-9ec4-42ba546ada3e2022-03-27T10:14:30ZAnalysis of high dimensional multivariate stochastic volatility modelsJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:e4267141-1297-40cc-9ec4-42ba546ada3eEconomicsEnglishOxford University Research Archive - Valet2006Chib, SNardari, FShephard, NThis paper is concerned with the Bayesian estimation and comparison of flexible, high dimensional multivariate time series models with time varying correlations. The model proposed and considered here combines features of the classical factor model with that of the heavy tailed univariate stochastic volatility model. A unified analysis of the model, and its special cases, is developed that encompasses estimation, filtering and model choice. The centerpieces of the estimation algorithm (which relies on MCMC methods) are: (1) a reduced blocking scheme for sampling the free elements of the loading matrix and the factors and (2) a special method for sampling the parameters of the univariate SV process. The resulting algorithm is scalable in terms of series and factors and simulation-efficient. Methods for estimating the log-likelihood function and the filtered values of the time-varying volatilities and correlations are also provided. The performance and effectiveness of the inferential methods are extensively tested using simulated data where models up to 50 dimensions and 688 parameters are fit and studied. The performance of our model, in relation to various multivariate GARCH models, is also evaluated using a real data set of weekly returns on a set of 10 international stock indices. We consider the performance along two dimensions: the ability to correctly estimate the conditional covariance matrix of future returns and the unconditional and conditional coverage of the 5% and 1% value-at-risk (VaR) measures of four pre-defined portfolios. |
| spellingShingle | Economics Chib, S Nardari, F Shephard, N Analysis of high dimensional multivariate stochastic volatility models |
| title | Analysis of high dimensional multivariate stochastic volatility models |
| title_full | Analysis of high dimensional multivariate stochastic volatility models |
| title_fullStr | Analysis of high dimensional multivariate stochastic volatility models |
| title_full_unstemmed | Analysis of high dimensional multivariate stochastic volatility models |
| title_short | Analysis of high dimensional multivariate stochastic volatility models |
| title_sort | analysis of high dimensional multivariate stochastic volatility models |
| topic | Economics |
| work_keys_str_mv | AT chibs analysisofhighdimensionalmultivariatestochasticvolatilitymodels AT nardarif analysisofhighdimensionalmultivariatestochasticvolatilitymodels AT shephardn analysisofhighdimensionalmultivariatestochasticvolatilitymodels |