Estimation of Multivariate Stochastic Volatility Models: A Comparative Monte Carlo Study

M. Hakan Eratalay

doi:https://doi.org/10.33818/ier.278044

Article Details

Estimation of Multivariate Stochastic Volatility Models: A Comparative Monte Carlo Study

Authors:

M. Hakan Eratalay

Publisher:

Econometric Research Association

Main Topics:

Sociology and anthropology | Management

Journal:

International Econometric Review 2016 Vol.8 Issue 2, pp.19-52

Document Type:

Article

Publication Date:

9/2016

Document Language:

Turkish

Document ID (Org No.):

2000717664

Frequency:

Quarterly

eISSN:

1308-8815

pISSN:

1308-8793

DOI:

https://doi.org/10.33818/ier.278044

Abstract:

 

In this paper, we compare the small sample performances of Quasi Maximum Likelihood (QML) and Monte Carlo Likelihood (MCL) methods through Monte Carlo studies for  several multivariate stochastic volatility models, among which we consider two new models that account for leverage effects. Our results confirm previous findings within the  literature, namely, that the MCL estimator has better finite sample performance compared to the QML estimator. QML estimator's performance is closer to that of MCL estimator  when the volatility processes have higher variance or when the correlations are high and/or time varying, but it performs relatively worse when leverage is introduced.  Finally, we include an empirical illustration by estimating an MSV model with leverage using a trivariate data from the major European stock markets.

Article Details

Estimation of Multivariate Stochastic Volatility Models: A Comparative Monte Carlo Study

Authors: M. Hakan Eratalay

Publisher: Econometric Research Association

Main Topics: Sociology and anthropology | Management

Journal: International Econometric Review 2016 Vol.8 Issue 2, pp.19-52

Document Type: Article

Publication Date: 9/2016

Document Language: Turkish

Document ID (Org No.): 2000717664

Frequency: Quarterly

eISSN: 1308-8815

pISSN: 1308-8793

DOI: https://doi.org/10.33818/ier.278044

Issues

Authors:

M. Hakan Eratalay

Publisher:

Econometric Research Association

Main Topics:

Sociology and anthropology | Management

Journal:

International Econometric Review 2016 Vol.8 Issue 2, pp.19-52

Document Type:

Article

Publication Date:

9/2016

Document Language:

Turkish

Document ID (Org No.):

2000717664

Frequency:

Quarterly

eISSN:

1308-8815

pISSN:

1308-8793

DOI:

https://doi.org/10.33818/ier.278044