arXiv 6 Jul 2020 · Econometrics
arXiv:2007.02588 · PDF · DOI · OpenAlex · Extracted main text
This paper presents a novel estimator of orthogonal GARCH models, which combines (eigenvalue and -vector) targeting estimation with stepwise (univariate) estimation. We denote this the spectral targeting estimator. This two-step estimator is consistent under finite second order moments, while asymptotic normality holds under finite fourth order moments. The estimator is especially well suited for modelling larger portfolios: we compare the empirical performance of the spectral targeting estimator to that of the quasi maximum likelihood estimator for five portfolios of 25 assets. The spectral targeting estimator dominates in terms of computational complexity, being up to 57 times faster in estimation, while both estimators produce similar out-of-sample forecasts, indicating that the spectral targeting estimator is well suited for high-dimensional empirical applications.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Hetland, S., Pedersen, R.S., Rahbek, A (2019) Dynamic Conditional Eigenvalue GARCH self | 1.000 | 7 | 4 | 100% |
| 2 | Francq, C (2016) Estimating multivariate volatility models equation by equation | 0.928 | 4 | 3 | 100% |
| 3 | Francq, C (2019) GARCH Models: Structure, Statistical Inference and Financial Applications | 0.737 | 3 | 3 | 67% |
| 4 | Francq, C., Horvath, L (2014) Variance targeting estimation of multivariate GARCH models | 0.737 | 3 | 2 | 100% |
| 5 | Pedersen, R.S., Rahbek, A (2014) Multivariate variance targeting in the BEKK–GARCH model | 0.721 | 8 | 5 | 38% |
| 6 | Ledoit, O., Wolf, M (2004) Honey, I shrunk the sample covariance matrix | 0.644 | 2 | 2 | 100% |
| 7 | Ledoit, O., Wolf, M (2012) Nonlinear shrinkage estimation of large-dimensional covariance matrices | 0.644 | 2 | 2 | 100% |
| 8 | Francq, C., Horvath, L (2011) Merits and drawbacks of variance targeting in GARCH models | 0.511 | 3 | 2 | 33% |
| 9 | Newey, W. K., McFadden, D (1994) Large sample estimation and hypothesis testing | 0.511 | 2 | 2 | 50% |
| 10 | Pedersen, R.S (2016) Targeting estimation of CCC-GARCH models with infinite fourth moments | 0.511 | 2 | 2 | 50% |
Showing the top 10 of 31 scored citations.