The name is absent



presence of different regimes in volatility (Forbes and Rigobon (1999)). This paper makes a step
forward and suggests to analyze time varying conditional correlation between international stock
markets by utilizing the recent methodology by Engle (2002), a multivariate GARCH dynamic
conditional correlation analysis (DCC-GARCH).

A DCC-GARCH class of models encompasses the parsimony of univariate GARCH
models of individual assets volatility with a GARCH-like time varying correlations. The
estimation of the DCC-GARCH model is a two-step procedure. In the first step, univariate
GARCH models are estimated for each time series, in the second step transformed residuals from
the first stage are used to obtain conditional correlation estimator. The model assumes that returns
from the
k series are multivariate normally distributed with zero mean value and covariance
matrix
Ht:

r,F,-ι~ N (0, Ht )                                                                                      (5)

HtDtRtDt,                                                                                 (6)

where Dt is a kxk matrix of time varying standard deviations from univariate GARCH
models with
h^ on the ith diagonal, following a univariate GARCH model. The proposed
dynamic correlation structure is:

Rt = (Qt*)-1Qt(Qt*)-1,                                                                                           (7)

where Qt* is a diagonal matrix composed of the of the square root of the diagonal elements
of the
Qt and Qt follows a GARCH type of process:

MNM  N

Qt = (1 αm -βn)Q + ^αm(ε'tεt) + βnQt-n,                                   (8)

m =1          n=1              m=1                   n=1

where Q is an unconditional covariance matrix of the standardized residuals from the first-
stage estimation.

16



More intriguing information

1. Imitation in location choice
2. EU enlargement and environmental policy
3. If our brains were simple, we would be too simple to understand them.
4. The name is absent
5. The name is absent
6. Bridging Micro- and Macro-Analyses of the EU Sugar Program: Methods and Insights
7. The name is absent
8. Spectral calibration of exponential Lévy Models [1]
9. A methodological approach in order to support decision-makers when defining Mobility and Transportation Politics
10. The Role of Immigration in Sustaining the Social Security System: A Political Economy Approach
11. Biological Control of Giant Reed (Arundo donax): Economic Aspects
12. The use of formal education in Denmark 1980-1992
13. The name is absent
14. The name is absent
15. The name is absent
16. Implementation of a 3GPP LTE Turbo Decoder Accelerator on GPU
17. Word searches: on the use of verbal and non-verbal resources during classroom talk
18. The name is absent
19. CHANGING PRICES, CHANGING CIGARETTE CONSUMPTION
20. The name is absent