Activities per year
Abstract
As an alternative to quasimaximum likelihood, targeting estimation is a much applied estimation method for univariate and multivariate GARCH models. In terms of variance targeting estimation recent research has pointed out that at least finite fourthorder moments of the data generating process is required if one wants to perform inference in GARCH models relying on asymptotic normality of the estimator,see Pedersen and Rahbek (2014) and Francq et al. (2011). Such moment conditions may not be satisfied in practice for financial returns highlighting a large drawback of variance targeting estimation. In this paper we consider the largesample properties of the variance targeting estimator for the multivariate extended constant conditional correlation GARCH model when the distribution of the data generating process has infinite fourth moments. Using nonstandard limit theory we derive new results for the estimator stating that its limiting distribution is multivariate stable. The rate of consistency of the estimator is slower than √Τ (as obtained by the quasimaximum likelihood estimator) and depends on the tails of the data generating process.
Original language  English 

Place of Publication  Kbh. 
Publisher  Økonomisk institut, Københavns Universitet 
Number of pages  31 
Publication status  Published  2014 
Series  University of Copenhagen. Institute of Economics. Discussion Papers (Online) 

Number  04 
Volume  2014 
ISSN  16012461 
Bibliographical note
JEL Classification: C32, C51, C58Keywords
 Faculty of Social Sciences
 Targeting
 Variance targeting
 Multivariate GARCH
 constant conditional correlation
 asymptotic theory
 time series
 multivariate regular variation
 stable distributions
Activities

10th BMRCDEMS Conference
Rasmus Søndergaard Pedersen (Speaker)
28 May 2014 → 30 May 2014Activity: Participating in an event  types › Organisation of and participation in conference

SoFiE/INET Workshop on Skewness, Heavy Tails, Market Crashes, and Dynamics
Rasmus Søndergaard Pedersen (Speaker)
28 Apr 2014 → 29 Apr 2014Activity: Participating in an event  types › Participation in workshop, seminar, course