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  • Large_Shocks_final_March_02_2019

    Rights statement: This is the peer reviewed version of the following article: Izzeldin, M. , Tsionas, M. G. and Michaelides, P. G. (2019), Multivariate stochastic volatility with large and moderate shocks. J. R. Stat. Soc. A. doi:10.1111/rssa.12443 which has been published in final form at https://rss.onlinelibrary.wiley.com/doi/full/10.1111/rssa.12443 This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.

    Accepted author manuscript, 1.73 MB, PDF document

    Available under license: CC BY-NC: Creative Commons Attribution-NonCommercial 4.0 International License

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Multivariate stochastic volatility with large and moderate shocks

Research output: Contribution to journalJournal articlepeer-review

E-pub ahead of print
<mark>Journal publication date</mark>23/03/2019
<mark>Journal</mark>Journal of the Royal Statistical Society: Series A Statistics in Society
Publication StatusE-pub ahead of print
Early online date23/03/19
<mark>Original language</mark>English

Abstract


The paper proposes a multivariate stochastic volatility model where shifts in volatility are endogenously driven by large return shocks. The model proposed generalizes the univariate stochastic volatility model of Dendramis and colleagues to a multivariate context. Allowing for multivariate dependence permits the volatility of common return factors to affect individual stock returns volatility jointly. The model is further extended to allow for endogenous thresholds that depend on covariates. Model selection priors are introduced and the new techniques are applied by using data from the FTSE100‐index.

Bibliographic note

This is the peer reviewed version of the following article: Izzeldin, M. , Tsionas, M. G. and Michaelides, P. G. (2019), Multivariate stochastic volatility with large and moderate shocks. J. R. Stat. Soc. A. doi:10.1111/rssa.12443 which has been published in final form at https://rss.onlinelibrary.wiley.com/doi/full/10.1111/rssa.12443 This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.