Emilija Dzuverovic, Matteo Barigozzi
arXiv 15 May 2023 · Econometrics
arXiv:2305.08488 · PDF · DOI · OpenAlex · Extracted main text
We introduce a HD DCC-HEAVY class of hierarchical-type factor models for high-dimensional covariance matrices, employing the realized measures built from higher-frequency data. The modelling approach features straightforward estimation and forecasting schemes, independent of the cross-sectional dimension of the assets under consideration, and accounts for sophisticated asymmetric dynamics in the covariances. Empirical analyses suggest that the HD DCC-HEAVY models have a better in-sample fit and deliver statistically and economically significant out-of-sample gains relative to the existing hierarchical factor model and standard benchmarks. The results are robust under different frequencies and market conditions.
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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 | Hansen, P. R., Lunde, A., and Voev, V (2014) Realized beta GARCH: A multivariate GARCH model with realized measures of volatility | 1.000 | 14 | 4 | 100% |
| 2 | Bauwens, L. and Xu, Y (2023) DCC- and DECO-HEAVY: Multivariate GARCH models based on realized variances and correlations | 1.000 | 10 | 5 | 100% |
| 3 | Noureldin, D., Shephard, N., and Sheppard, K (2012) Multivariate high-frequency-based volatility (HEAVY) models | 1.000 | 6 | 4 | 100% |
| 4 | Ledoit, O. and Wolf, M (2017) Nonlinear shrinkage of the covariance matrix for portfolio selection: Markowitz meets Goldilocks | 1.000 | 5 | 3 | 100% |
| 5 | Shephard, N. and Sheppard, K (2010) Realising the future: Forecasting with high-frequency-based volatility (HEAVY) models | 0.928 | 4 | 4 | 100% |
| 6 | Fama, E. F. and French, K. R (1993) Common risk factors in the returns on stocks and bonds | 0.737 | 3 | 2 | 100% |
| 7 | Carhart, M. M (1997) On persistence in mutual fund performance | 0.644 | 2 | 2 | 100% |
| 8 | Corsi, F., Buccheri, G., and Vassallo, D (2021) A DCC-type approach for realized covariance modeling with score-driven dynamics | 0.644 | 2 | 2 | 100% |
| 9 | Engle, R. F (2002) Dynamic conditional correlation: A simple class of multivariate generalized autoregressive conditional heteroskedasticity models | 0.644 | 2 | 2 | 100% |
| 10 | Fama, E. F. and French, K. R (2015) A five-factor asset pricing model | 0.644 | 2 | 2 | 100% |
Showing the top 10 of 28 scored citations.