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Title: Estimation of multivariate factor stochastic volatility models Authors:  Christian Muecher - University of Konstanz (Germany) [presenting]
Roxana Halbleib - University of Konstanz (Germany)
Giorgio Calzolari - University of Firenze (Italy)
Abstract: A frequentist procedure is introduced to estimate multivariate factor stochastic volatility models. The estimation is done in two steps. First, the factor loadings and idiosyncratic variances are estimated by approximating the dynamic factor model with a static one. Second, we apply the Efficient Method of Moments with GARCH(1,1) as an auxiliary model to estimate the stochastic volatility parameters governing the dynamic latent factors and idiosyncratic noises. Based on various simulations, we show that our procedure outperforms existing approaches in terms of accuracy and efficiency and it has clear computational advantages over the existing Bayesian methods.