Multivariate Variance Targeting in the BEKK-GARCH Model

Rasmus Søndergaard Pedersen; Anders Rahbek

Multivariate Variance Targeting in the BEKK-GARCH Model

Rasmus Søndergaard Pedersen, Anders Rahbek

Department of Economics

Abstract

This paper considers asymptotic inference in the multivariate BEKK model
based on (co-)variance targeting (VT). By de…nition the VT estimator is a two-step
estimator and the theory presented is based on expansions of the modi…ed like-
lihood function, or estimating function, corresponding to these two steps. Strong
consistency is established under weak moment conditions, while sixth order moment
restrictions are imposed to establish asymptotic normality. Included simulations in-
dicate that the multivariately induced higher-order moment constraints are indeed
necessary.

Original language	English
Place of Publication	Kbh.
Publisher	Økonomisk institut, Københavns Universitet
Number of pages	33
Publication status	Published - 2012

Series	University of Copenhagen. Institute of Economics. Discussion Papers (Online)
Number	23
Volume	12
ISSN	1601-2461

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Cite this

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