A skewed GARCH-type model for multivariate financial time series推荐.pdfVIP

A skewed GARCH-type model for multivariate financial time series Cinzia Franceschini and Nicola Loperfido Abstract. Skewness of a random vector can be evaluated via its third cumulant, i.e., a ma- trix whose elements are central moments of order three. In the general case, modelling third cumulants might require a large number of parameters, which can be substantially reduced if skew-normality of the underlying distribution is assumed. We propose a multivariate GARCH model with constant conditional correlations and multivariate skew-normal random shocks. The application deals with multivariate financial time series whose skewness is significantly negative, according to the sign test for symmetry. Key words: financial returns, skew-normal distribution, third cumulant 1 Introduction Observed financial returns are often negatively skewed, i.e., the third central moment is negative. This empirical finding is discussed in [3]. [7] conjectures that negative skewness originates from asymmetric behaviour of financial markets with respect to relevant news. [6] conclude that \Skewness should be taken into account in the estimation of stock returns. Skewness of financial returns has been modelled in several ways. [12] reviews previous literature on this topic. [5] models skewness as a direct consequence of the feedback effect. [4] generalises the model to the multivariate case. All the above authors deal with scalar measures of skewness, even when they model multivariate returns. In this paper, we measure skewness of a random vector using a matrix containing all its central moments of order three. More precisely, we measure and model skewness of a random vector using its third cumulant and the multivariate skew-normal distribution [2], respectively. It is structured as follows. Sections 2 and 3 recall the definition and some basic properties of the multivariate third moment and the multivariate skew-normal distribution. Section 4 introduce