2012-14
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Number
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2012-14 | |
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Authors
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Bastian Gribisch | |
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Title
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Multivariate Wishart Stochastic Volatility and Changes in Regime | |
| Abstract | This paper generalizes the basic
Wishart multivariate stochastic volatility model of Philipov and
Glickman (2006) and Asai and McAleer (2009) to encompass regime
switching behavior. The latent state variable is driven by a first-order
Markov process. The model allows for state-dependent (co)variance and
correlation levels and state-dependent volatility spillover effects.
Parameter estimates are obtained using Bayesian Markov Chain Monte Carlo
procedures and filtered estimates of the latent variances and
covariances are generated by particle filter techniques. The model is
applied to five European stock index return series. The results show
that the proposed regime-switching specification substantially improves
the in-sample fit and the VaR forecasting performance relative to the
basic model. Keywords: Multivariate stochastic volatility, Dynamic correlations, Wishart distribution, Markov switching, Markov chain Monte Carlo JEL classification: C32, C58, G17 |
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| Links | Full Text | |