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

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dc.contributor.author García-Ferrer, Antonio
dc.contributor.author González-Prieto, Ester
dc.contributor.author Peña, Daniel
dc.contributor.editor Universidad Carlos III de Madrid. Departamento de Estadística
dc.date.accessioned 2008-12-23T09:29:53Z
dc.date.available 2008-12-23T09:29:53Z
dc.date.issued 2008-12
dc.identifier.uri http://hdl.handle.net/10016/3383
dc.description.abstract We 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.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries UC3M Working papers. Statistics and Econometrics
dc.relation.ispartofseries 08-28
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.other ICA
dc.subject.other Multivariate GARCH
dc.subject.other Factor models
dc.subject.other Forecasting volatility
dc.title A multivariate generalized independent factor GARCH model with an application to financial stock returns
dc.type workingPaper
dc.subject.eciencia Estadística
dc.rights.accessRights openAccess
dc.identifier.repec ws087528
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