Factor Stochastic Volatility in Mean Models: A GMM Approach

@inproceedings{Doz2006FactorSV,
  title={Factor Stochastic Volatility in Mean Models: A GMM Approach},
  author={Catherine Doz and Eric Renault},
  year={2006}
}
This paper provides a semiparametric framework for modeling multivariate conditional heteroskedasticity. We put forward latent stochastic volatility (SV) factors as capturing the commonality in the joint conditional variance matrix of asset returns. This approach is in line with common features as studied by Engle and Kozicki (1993), and it allows us to focus on identication of factors and factor loadings through first- and second-order conditional moments only. We assume that the time-varying… CONTINUE READING

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