Dynamic Conditional Correlation
Top Cited Papers
- 1 July 2002
- journal article
- Published by Informa UK Limited in Journal of Business & Economic Statistics
- Vol. 20 (3), 339-350
- https://doi.org/10.1198/073500102288618487
Abstract
Time varying correlations are often estimated with multivariate generalized autoregressive conditional heteroskedasticity (GARCH) models that are linear in squares and cross products of the data. A new class of multivariate models called dynamic conditional correlation models is proposed. These have the flexibility of univariate GARCH models coupled with parsimonious parametric models for the correlations. They are not linear but can often be estimated very simply with univariate or two-step methods based on the likelihood function. It is shown that they perform well in a variety of situations and provide sensible empirical results.Keywords
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