Multivariate leverage effects and realized semicovariance GARCH models

Published

Journal Article

© 2019 Elsevier B.V. We propose new asymmetric multivariate volatility models. The models exploit estimates of variances and covariances based on the signs of high-frequency returns, measures known as realized semivariances, semicovariances, and semicorrelations, to allow for more nuanced responses to positive and negative return shocks than threshold “leverage effect” terms traditionally used in the literature. Our empirical implementations of the new models, including extensions of widely-used bivariate GARCH specifications for a number of individual stocks and the aggregate market portfolio as well as larger dimensional dynamic conditional correlation type formulations for a cross-section of individual stocks, provide clear evidence of improved model fit and reveal new and interesting asymmetric joint dynamic dependencies.

Full Text

Duke Authors

Cited Authors

  • Bollerslev, T; Patton, AJ; Quaedvlieg, R

Published Date

  • August 1, 2020

Published In

Volume / Issue

  • 217 / 2

Start / End Page

  • 411 - 430

Electronic International Standard Serial Number (EISSN)

  • 1872-6895

International Standard Serial Number (ISSN)

  • 0304-4076

Digital Object Identifier (DOI)

  • 10.1016/j.jeconom.2019.12.011

Citation Source

  • Scopus