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A multivariate generalized independent factor GARCH model with an application to financial stock returns

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dc.affiliation.dptoUC3M. Departamento de Estadísticaes
dc.contributor.authorGarcía-Ferrer, Antonio
dc.contributor.authorGonzález-Prieto, Ester
dc.contributor.authorPeña, Daniel
dc.contributor.editorUniversidad Carlos III de Madrid. Departamento de Estadística
dc.date.accessioned2008-12-23T09:29:53Z
dc.date.available2008-12-23T09:29:53Z
dc.date.issued2008-12
dc.description.abstractWe propose a new multivariate factor GARCH model, the GICA-GARCH model , where the data are assumed to be generated by a set of independent components (ICs). This model applies independent component analysis (ICA) to search the conditionally heteroskedastic latent factors. We will use two ICA approaches to estimate the ICs. The first one estimates the components maximizing their non-gaussianity, and the second one exploits the temporal structure of the data. After estimating the ICs, we fit an univariate GARCH model to the volatility of each IC. Thus, the GICA-GARCH reduces the complexity to estimate a multivariate GARCH model by transforming it into a small number of univariate volatility models. We report some simulation experiments to show the ability of ICA to discover leading factors in a multivariate vector of financial data. An empirical application to the Madrid stock market will be presented, where we compare the forecasting accuracy of the GICA-GARCH model versus the orthogonal GARCH one.
dc.format.mimetypeapplication/pdf
dc.identifier.repecws087528
dc.identifier.urihttps://hdl.handle.net/10016/3383
dc.language.isoeng
dc.relation.ispartofseriesUC3M Working papers. Statistics and Econometrics
dc.relation.ispartofseries08-28
dc.rightsAtribución-NoComercial-SinDerivadas 3.0 España
dc.rights.accessRightsopen access
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.ecienciaEstadística
dc.subject.otherICA
dc.subject.otherMultivariate GARCH
dc.subject.otherFactor models
dc.subject.otherForecasting volatility
dc.titleA multivariate generalized independent factor GARCH model with an application to financial stock returns
dc.typeworking paper*
dspace.entity.typePublication
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