Transcription of DYNAMIC CONDITIONAL CORRELATION – A SIMPLE CLASS …
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DYNAMIC CONDITIONAL CORRELATION – A SIMPLE CLASS …
1 DYNAMIC CONDITIONAL CORRELATION A SIMPLE CLASS OF MULTIVARIATE GARCH MODELS Robert Engle1 July 1999 Revised Jan 2002 Forthcoming Journal of Business and Economic Statistics 2002 Abstract Time varying correlations are often estimated with Multivariate Garch models that are linear in squares and cross products of the data. A new CLASS of multivariate models called DYNAMIC CONDITIONAL CORRELATION (DCC) models is proposed. These have the flexibility of univariate GARCH models coupled with parsimonious parametric models for the correlations. They are not linear but can often be estimated very simply with univariate or two step methods based on the likelihood function.
Sheppard for research assistance, and Pat Burns and John Geweke for insightful comments. Thanks also go to seminar participants at New York University, UCSD, Academica Sinica, Taiwan, CNRS Montreal, University of Iowa, Journal of ... correlation estimator is defined for returns with a zero mean as: (4) − ...
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