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Multivariate EGARCHX‐modelling of the international asset return signal response mechanism
Author(s) -
Östermark Ralf,
Höglund Rune
Publication year - 1997
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/(sici)1099-1158(199707)2:3<249::aid-ijfe47>3.0.co;2-4
Subject(s) - heteroscedasticity , economics , multivariate statistics , econometrics , futures contract , financial economics , stock (firearms) , capital asset pricing model , mathematics , statistics , mechanical engineering , engineering
The integration of national financial economies, enhanced by loosening capital control, has motivated the study of co‐movements between markets. In this paper we use a variant of the multivariate EGARCH method, due to Koutmos and Booth, to study the impact of the Japanese stock prices on the Finnish derivatives market, both in the first and second moments. We extend the algorithm to MEGARCHX, by including exogenous variables in the estimation problem. MEGARCHX modelling of the Finnish stock returns and Futures returns effectively captures the linear dependence and heteroscedasticity present in the series. © 1997 John Wiley & Sons, Ltd.