Department of Economics and Business Economics

Timo Teräsvirta

Modeling conditional correlations of asset returns: A smooth transition approach

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

Standard

Modeling conditional correlations of asset returns : A smooth transition approach. / Silvennoinen, Annastiina; Teräsvirta, Timo.

In: Econometric Reviews, Vol. 34, No. 1-2, 2015, p. 174-197.

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

Harvard

APA

CBE

MLA

Vancouver

Author

Silvennoinen, Annastiina ; Teräsvirta, Timo. / Modeling conditional correlations of asset returns : A smooth transition approach. In: Econometric Reviews. 2015 ; Vol. 34, No. 1-2. pp. 174-197.

Bibtex

@article{0e0bfc62884248f19c7c5ec48ec4d274,
title = "Modeling conditional correlations of asset returns: A smooth transition approach",
abstract = "In this paper we propose a new multivariate GARCH model with time-varying conditional correlation structure. The time-varying conditional correlations change smoothly between two extreme states of constant correlations according to a predetermined or exogenous transition variable. An LM-test is derived to test the constancy of correlations and LM- and Wald tests to test the hypothesis of partially constant correlations. Analytical expressions for the test statistics and the required derivatives are provided to make computations feasible. An empirical example based on daily return series of five frequently traded stocks in the S&P 500 stock index completes the paper.",
keywords = "Constant conditional correlation, Dynamic conditional correlation, Multivariate GARCH, Return comovement, Variable correlation GARCH model, Volatility model evaluation",
author = "Annastiina Silvennoinen and Timo Ter{\"a}svirta",
note = "Campus adgang til artiklen / Campus access to the article",
year = "2015",
doi = "10.1080/07474938.2014.945336",
language = "English",
volume = "34",
pages = "174--197",
journal = "Econometric Reviews",
issn = "0747-4938",
publisher = "Taylor & Francis Inc.",
number = "1-2",

}

RIS

TY - JOUR

T1 - Modeling conditional correlations of asset returns

T2 - Econometric Reviews

AU - Silvennoinen, Annastiina

AU - Teräsvirta, Timo

N1 - Campus adgang til artiklen / Campus access to the article

PY - 2015

Y1 - 2015

N2 - In this paper we propose a new multivariate GARCH model with time-varying conditional correlation structure. The time-varying conditional correlations change smoothly between two extreme states of constant correlations according to a predetermined or exogenous transition variable. An LM-test is derived to test the constancy of correlations and LM- and Wald tests to test the hypothesis of partially constant correlations. Analytical expressions for the test statistics and the required derivatives are provided to make computations feasible. An empirical example based on daily return series of five frequently traded stocks in the S&P 500 stock index completes the paper.

AB - In this paper we propose a new multivariate GARCH model with time-varying conditional correlation structure. The time-varying conditional correlations change smoothly between two extreme states of constant correlations according to a predetermined or exogenous transition variable. An LM-test is derived to test the constancy of correlations and LM- and Wald tests to test the hypothesis of partially constant correlations. Analytical expressions for the test statistics and the required derivatives are provided to make computations feasible. An empirical example based on daily return series of five frequently traded stocks in the S&P 500 stock index completes the paper.

KW - Constant conditional correlation

KW - Dynamic conditional correlation

KW - Multivariate GARCH

KW - Return comovement

KW - Variable correlation GARCH model

KW - Volatility model evaluation

U2 - 10.1080/07474938.2014.945336

DO - 10.1080/07474938.2014.945336

M3 - Journal article

VL - 34

SP - 174

EP - 197

JO - Econometric Reviews

JF - Econometric Reviews

SN - 0747-4938

IS - 1-2

ER -