Most multivariate variance models suffer from a common problem, the “curse of dimensionality”. For this reason, most are fitted under strong parametric restrictions that reduce the interpretation and flexibility of the models. Recently, the literature has focused on multivariate models with milder restrictions, whose purpose was to combine the need for interpretability and efficiency faced by model users with the computational problems that may emerge when the number of assets is quite large. We contribute to this strand of the literature proposing a block-type parameterization for multivariate stochastic volatility models.

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Keywords block structures, curse of dimensionality, multivariate stochastic volatility
JEL C10, Econometric and Statistical Methods: General (jel), C32, Time-Series Models; Dynamic Quantile Regressions (jel), C51, Model Construction and Estimation (jel)
Publisher Erasmus School of Economics (ESE)
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