Template-type: ReDIF-Paper 1.0
Author-Name: Manabu Asai
Author-Email: m-asai@soka.ac.jp
Author-Workplace-Name: Faculty of Economics Soka University, Japan.
Author-Name: Chia-Lin Chang
Author-Email: changchialin@nchu.edu.tw
Author-Workplace-Name: Department of Applied Economics Department of Finance National Chung Hsing University Taichung, Taiwan.
Author-Name: Michael McAleer
Author-Workplace-Name:
 Department of Quantitative Finance National Tsing Hua University, Taiwan and Econometric Institute, Erasmus 
	School of Economics Erasmus University Rotterdam and Tinbergen Institute, The Netherlands and Department of Quantitative 
	Economics Complutense University of Madrid, Spain.
Title: Realized Matrix-Exponential Stochastic Volatility with Asymmetry, Long Memory and Spillovers
Abstract: The paper develops a novel realized matrix-exponential stochastic volatility model of multivariate returns and realized 
	covariances that incorporates asymmetry and long memory (hereafter the RMESV-ALM model). The matrix exponential 
	transformation guarantees the positivedefiniteness of the dynamic covariance matrix. The contribution of the paper ties in 
	with Robert Basmann’s seminal work in terms of the estimation of highly non-linear model specifications (“Causality tests 
	and observationally equivalent representations of econometric models”, Journal of Econometrics, 1988, 39(1-2), 69–104), 
	especially for developing tests for leverage and spillover effects in the covariance dynamics. Efficient importance 
	sampling is used to maximize the likelihood function of RMESV-ALM, and the finite sample properties of the quasi-maximum 
	likelihood estimator of the parameters are analysed. Using high frequency data for three US financial assets, the new model 
	is estimated and evaluated. The forecasting performance of the new model is compared with a novel dynamic realized 
	matrix-exponential conditional covariance model. The volatility and co-volatility spillovers are examined via the news 
	impact curves and the impulse response functions from returns to volatility and co-volatility.
Classification-JEL: C22, C32, C58, G32.
Keywords: Matrix-exponential transformation, Realized stochastic covariances, Realized conditional covariances, Asymmetry, Long 
	memory, Spillovers, Dynamic covariance matrix, Finite sample properties, Forecasting performance. 
Length: 39 pages 
Creation-Date: 2016-09
Number: 2016-15
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1615.txt
File-URL: https://eprints.ucm.es/id/eprint/39132/1/1615.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1615