A multivariate skew-garch model

Giovanni De Luca, Marc G. Genton, Nicola Loperfido

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review

33 Scopus citations

Abstract

Empirical research on European stock markets has shown that they behave differently according to the performance of the leading financial market identified as the US market. A positive sign is viewed as good news in the international financial markets, a negative sign means, conversely, bad news. As a result, we assume that European stock market returns are affected by endogenous and exogenous shocks. The former raise in the market itself, the latter come from the US market, because of its most influential role in the world. Under standard assumptions, the distribution of the European market index returns conditionally on the sign of the one-day lagged US return is skew-normal. The resulting model is denoted Skew-GARCH. We study the properties of this new model and illustrate its application to time-series data from three European financial markets.

Original languageEnglish (US)
Title of host publicationEconometric Analysis of Financial and Economic Time Series
EditorsDek Terrell, Thomas Fomby
Pages33-57
Number of pages25
DOIs
StatePublished - 2006
Externally publishedYes

Publication series

NameAdvances in Econometrics
Volume20 PART 1
ISSN (Print)0731-9053

ASJC Scopus subject areas

  • Economics and Econometrics

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