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A multivariate HAR-RV model with heteroscedastic errors and its WLS estimation

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  • Hwang, Eunju
  • Hong, Won-Tak

Abstract

This work considers a multivariate heterogeneous autoregressive-realized volatility (HAR-RV) model in the presence of heteroscedasticity and aims to analyze realized volatilities of multiple assets that possess non-standard features, such as non-Gaussianity, time varying volatility and long-memory dependence. For capturing the long-memory, a HAR-RV model is employed, while for a heavy-tailed distribution, a GARCH process is adopted on the noise term. To estimate coefficients of the HAR-RV-GARCH model, we suggest weighted least squares estimator (WLSE) based on an observed weighting scheme and prove its asymptotic normality. Simulation results show a good performance on the WLSE. The multivariate HAR-RV-GARCH model fitted by the WLSE is illustrated with an application to realized volatilities of multiple financial data.

Suggested Citation

  • Hwang, Eunju & Hong, Won-Tak, 2021. "A multivariate HAR-RV model with heteroscedastic errors and its WLS estimation," Economics Letters, Elsevier, vol. 203(C).
    • Handle: RePEc:eee:ecolet:v:203:y:2021:i:c:s0165176521001324
    DOI: 10.1016/j.econlet.2021.109855
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    References listed on IDEAS

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    Cited by:

    1. Hwang, Eunju, 2022. "Prediction intervals of the COVID-19 cases by HAR models with growth rates and vaccination rates in top eight affected countries: Bootstrap improvement," Chaos, Solitons & Fractals, Elsevier, vol. 155(C).
    2. Hwang, Eunju & Jeon, ChanHyeok, 2024. "Nonnegative GARCH-type models with conditional Gamma distributions and their applications," Computational Statistics & Data Analysis, Elsevier, vol. 198(C).

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