Bayesian Testing for Asset Volatility Persistence on Multivariate Stochastic Volatility Models英文文献资料.docVIP

Journal of Mathematical Finance, 2012, 2, 83-89 /10.4236/jmf.2012.21010 Published Online February 2012 (http://www.SciRP.org/journal/jmf) Bayesian Testing for Asset Volatility Persistence on Multivariate Stochastic Volatility Models Yong Li, Fang-Ping Peng, Hao-Feng Xu Sun Yat-sen Business School, Sun Yat-sen University, Guangzhou, China Email: Received September 25, 2011; revised November 25, 2011; accepted November 30, 2011 ABSTRACT In empirical finance, it is well-known that the volatility of asset returns is highly persistent. The persistence of the vola- tility process may be checked by testing for a unit root on stochastic volatility models. In this paper, a Bayesian test statistic based on decision theory is developed for testing a unit root on multivariate stochastic volatility models. At last, the developed approach is applied to investigate the persistent effect of financial crisis on the two main stock markets in China. Keywords: Asset Volatility Persistency; Bayes Factor; Decision Theory; Markov Chain Monte Carlo; Unit Root Testing; Multivariate Stochastic Volatility Models 1. Introduction Raftery [8]). Under Bayesian framework, the unit root test problem was regarded as a model comparison problem where two nonnested models, formulated respectively under the null and alternative hypothesis, were compared. Then, the method developed by Chib [9] was used for calculating Bayes factor. However, this method required the marginal likelihood, a marginalization over the un- known parameters and latent volatility under each model. In SV models, the number of unknown parameters and latent volatilities was very large (exceeding the number of observations), hence, obviously, the computational bur- den of the marginal likely-hood was formidable. By introducing a weighting function rather than using Chib [9]’s method, Li and Yu [10] derived a novel form for the Bayes factor through considering the special