[Statlist] Next talk: March 5, 2010 with Michael McAleer, Erasmus University Rotterdam

Susanne Kaiser-Heinzmann kaiser at stat.math.ethz.ch
Mon Mar 1 11:32:27 CET 2010

ETH and University of Zurich

Proff. P. Buehlmann - L. Held -
H.R. Kuensch - M. Maathuis - S. van de Geer

We are glad to announce the following talk

*Friday, March 5, 2010 15.15 - 17.00 HG G 19.1 *
with Michael McAleer, Erasmus University Rotterdam


Do We Really Need Both BEKK and DCC? A Tale of Two Multivariate GARCH 


The management and monitoring of very large portfolios of financial 
assets are routine for many individuals and organizations. The two most 
widely used models of conditional covariances and correlations in the 
class of multivariate GARCH models are BEKK and DCC. It is well known 
that BEKK suffers from the archetypal ?curse of dimensionality,? whereas 
DCC does not. It is argued in this paper that this is a misleading 
interpretation of the suitability of the two models for use in practice. 
The primary purpose of this paper is to analyze the similarities and 
dissimilarities between BEKK and DCC, both with and without targeting, 
on the basis of the structural derivation of the models, the 
availability of analytical forms for the sufficient conditions for 
existence of moments, sufficient conditions for consistency and 
asymptotic normality of the appropriate estimators, and computational 
tractability for ultra large numbers of financial assets. Based on 
theoretical considerations, the paper sheds light on how to discriminate 
between BEKK and DCC in practical applications.

Keywords: Conditional Correlations, Conditional Covariances, Diagonal 
Models, Forecasting, Generalized Models, Hadamard Models, Scalar models, 

This abstract is also to be found under the following link:

ETH Zürich
Susanne Kaiser-Heinzmann  sekretariat at stat.math.ethz.ch
Seminar für Statistik
Rämistrasse 101, HG G10.3	  phone: +41 44 6326518
CH-8092 Zurich, Switzerland	  fax  : +41 44 6321228

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