Econometric Analysis of Financial and Economic Time Series Part A, Volume 20 (Advances in Econometrics)

407 Pages·2006·4.64 MB·English

by  Terrell D. (ed.)

ECONOMETRIC ANALYSIS
OF FINANCIAL AND ECONOMIC
TIME SERIES
i
ADVANCES IN ECONOMETRICS
Series Editors: Thomas B. Fomby and R. Carter Hill
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ii
ADVANCES IN ECONOMETRICS VOLUME 20, PART A
ECONOMETRIC ANALYSIS
OF FINANCIAL AND
ECONOMIC TIME SERIES
EDITED BY
DEK TERRELL
Department of Economics, Louisiana State University,
Baton Rouge, LA 70803
THOMAS B. FOMBY
Department of Economics, Southern Methodist University,
Dallas, TX 75275
Amsterdam – Boston – Heidelberg – London – New York – Oxford
Paris – San Diego – San Francisco – Singapore – Sydney – Tokyo
iii
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CONTENTS
DEDICATION ix
LIST OF CONTRIBUTORS xi
INTRODUCTION
Dek Terrell and Thomas B. Fomby xiii
REMARKS BY ROBERT F. ENGLE III AND
SIR CLIVE W. J. GRANGER, KB
GivenDuringThirdAnnualAdvancesinEconometrics
Conference at Louisiana State University, Baton
Rouge, November 5–7, 2004
GOOD IDEAS
Robert F. Engle III xix
THE CREATIVITY PROCESS
Sir Clive W. J. Granger, KB xxiii
PART I: MULTIVARIATE VOLATILITY MODELS
A FLEXIBLE DYNAMIC CORRELATION MODEL
Dirk Baur 3
A MULTIVARIATE SKEW-GARCH MODEL
Giovanni De Luca, Marc G. Genton and Nicola 33
Loperfido
v
vi CONTENTS
SEMI-PARAMETRIC MODELING OF CORRELATION
DYNAMICS
Christian M. Hafner, Dick van Dijk and Philip Hans 59
Franses
A MULTIVARIATE HEAVY-TAILED DISTRIBUTION
FOR ARCH/GARCH RESIDUALS
Dimitris N. Politis 105
A PORTMANTEAU TEST FOR MULTIVARIATE
GARCH WHEN THE CONDITIONAL MEAN IS AN
ECM: THEORY AND EMPIRICAL APPLICATIONS
Chor-yiu Sin 125
PART II: HIGH FREQUENCY VOLATILITY MODELS
SAMPLING FREQUENCY AND WINDOW LENGTH
TRADE-OFFS IN DATA-DRIVEN VOLATILITY
ESTIMATION: APPRAISING THE ACCURACY OF
ASYMPTOTIC APPROXIMATIONS
Elena Andreou and Eric Ghysels 155
MODEL-BASED MEASUREMENT OF ACTUAL
VOLATILITY IN HIGH-FREQUENCY DATA
Borus Jungbacker and Siem Jan Koopman 183
NOISE REDUCED REALIZED VOLATILITY: A
KALMAN FILTER APPROACH
John P. Owens and Douglas G. Steigerwald 211
PART III: UNIVARIATE VOLATILITY MODELS
MODELING THE ASYMMETRY OF STOCK
MOVEMENTS USING PRICE RANGES
Ray Y. Chou 231
Contents vii
ON A SIMPLE TWO-STAGE CLOSED-FORM
ESTIMATOR FOR A STOCHASTIC VOLATILITY IN A
GENERAL LINEAR REGRESSION
Jean-Marie Dufour and Pascale Vale´ry 259
THE STUDENT’S T DYNAMIC LINEAR
REGRESSION: RE-EXAMINING VOLATILITY
MODELING
Maria S. Heracleous and Aris Spanos 289
ARCH MODELS FOR MULTI-PERIOD FORECAST
UNCERTAINTY: A REALITY CHECK USING A
PANEL OF DENSITY FORECASTS
Kajal Lahiri and Fushang Liu 321
NECESSARY AND SUFFICIENT RESTRICTIONS FOR
EXISTENCE OF A UNIQUE FOURTH MOMENT OF A
UNIVARIATE GARCH(P,Q) PROCESS
Peter A. Zadrozny 365
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viii
DEDICATION
Volume 20 of Advances in Econometrics is dedicated to Rob Engle and Sir
Clive Granger, winners of the 2003 Nobel Prize in Economics, for their
many valuable contributions to the econometrics profession. The Royal
Swedish Academy of Sciences cited Rob ‘‘for methods of analyzing eco-
nomic time series with time-varying volatility (ARCH),’’ while Clive was
cited ‘‘for methods of analyzing economic time series with common trends
(cointegration).’’ Of course, these citations are meant for public consump-
tionbutwespecialistsintime-seriesanalysisknowtheircontributionsgofar
beyondthesebriefcitations.ConsidersomeofRob’sothercontributionsto
our literature: Aggregation of Time Series, Band Spectrum Regression,
Dynamic Factor Models, Exogeneity, Forecasting in the Presence of Co-
integration, Seasonal Cointegration, Common Features, ARCH-M, Mul-
tivariate GARCH, Analysis of High Frequency Data, and CAViaR. Some
of Sir Clive’s additional contributions include Spectral Analysis of Eco-
nomicTimeSeries,BilinearTimeSeriesModels,CombinationForecasting,
Spurious Regression, Forecasting Transformed Time Series, Causality, Ag-
gregation of Time Series, Long Memory, Extreme Bounds, Multi-Cointe-
gration, and Non-linear Cointegration. No doubt, their Nobel Prizes are
richly deserved. And the 48 authors of the two parts of this volume think
likewise.Theyhaveauthoredsomeveryfinepapersthatcontributenicelyto
the same literature that Rob’s and Clive’s research helped build.
For more information on Rob’s and Clive’s Nobel prizes you can go to
the Nobel Prize website http://nobelprize.org/economics/laureates/2003/
index.html. In addition to the papers that are contributed here we are pub-
lishing remarks by Rob and Clive on the nature of innovation in econo-
metric research that were given during the Third Annual Advances in
Econometrics Conference at Louisiana State University in Baton Rouge,
November 5–7, 2004. We think you will enjoy reading their remarks. You
come away with the distinct impression that, although they may claim
they were ‘‘lucky’’ or ‘‘things just happened to fall in place,’’ having the
orientation of building models that solve practical problems has been an
orientation that has served them and our profession very well.
ix