Template-type: ReDIF-Paper 1.0
Author-Name: Manabu Asai
Author-Workplace-Name: Faculty of Economics, Soka University, Japan.
Author-Name: Chia-Lin Chang
Author-Workplace-Name: Department of Applied Economics & Department of Finance National Chung Hsing University, 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, The Netherlands and Department of Quantitative Economics Complutense University of 
	Madrid, Spain And Institute of Advanced Sciences Yokohama National University, Japan.
Author-Name: Laurent Pauwels
Author-Workplace-Name: Discipline of Business Analytics, University of Sydney Business School, Australia.
Title: Asymptotic Theory for Rotated Multivariate GARCH Models
Abstract: In this paper, we derive the statistical properties of a two step approach to estimating multivariate GARCH rotated BEKK (RBEKK) models. By the 
	definition of rotated BEKK, we estimate the unconditional covariance matrix in the first step in order to rotate observed variables to have the 
	identity matrix for its sample covariance matrix. In the second step, we estimate the remaining parameters via maximizing the quasi-likelihood 
	function. For this two step quasi-maximum likelihood (2sQML) estimator, we show consistency and asymptotic normality under weak conditions. While 
	second-order moments are needed for consistency of the estimated unconditional covariance matrix, the existence of finite sixthorder moments are 
	required for convergence of the second-order derivatives of the quasilog-likelihood function. We also show the relationship of the asymptotic 
	distributions of the 2sQML estimator for the RBEKK model and the variance targeting (VT) QML estimator for the VT-BEKK model. Monte Carlo experiments 
	show that the bias of the 2sQML estimator is negligible, and that the appropriateness of the diagonal specification depends on the closeness to either 
	of the Diagonal BEKK and the Diagonal RBEKK models.
Classification-JEL: C13, C32.
Keywords: BEKK, Rotated BEKK, Diagonal BEKK, Variance targeting, Multivariate GARCH, Consistency, Asymptotic normality.
Length: 30 pages 
Creation-Date: 2018-10
Number: 2018-27
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1827.txt
File-URL: https://eprints.ucm.es/id/eprint/49568/1/1827.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1827