B1929
Title: An efficient multivariate volatility model for many assets
Authors: Wenyu Li - The University of Hong Kong (China)
Yuchang Lin - Shanghai University of Finance and Economics (China)
Qianqian Zhu - Shanghai University of Finance and Economics (China) [presenting]
Guodong Li - University of Hong Kong (Hong Kong)
Abstract: A flexible and computationally efficient multivariate volatility model is developed, which allows for spill-over effects and dynamic conditional correlations among financial assets. The new model has desirable properties such as identifiability and computational tractability for many assets, and a sufficient condition of strict stationarity is derived for the new process. The quasi-maximum likelihood estimation is proposed for the new model with and without low-rank constraints on the coefficient matrices, and the asymptotic properties are established for estimators under both situations. Moreover, a Bayesian information criterion with selection consistency is developed for order selection. The finite sample performance of the proposed methods is evaluated in simulation studies, and the usefulness of the new model is illustrated by two empirical examples.
