Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5097175 | Journal of Econometrics | 2008 | 16 Pages |
Abstract
We derive indirect estimators of conditionally heteroskedastic factor models in which the volatilities of common and idiosyncratic factors depend on their past unobserved values by calibrating the score of a Kalman-filter approximation with inequality constraints on the auxiliary model parameters. We also propose alternative indirect estimators for large-scale models, and explain how to apply our procedures to many other dynamic latent variable models. We analyse the small sample behaviour of our indirect estimators and several likelihood-based procedures through an extensive Monte Carlo experiment with empirically realistic designs. Finally, we apply our procedures to weekly returns on the Dow 30 stocks.
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Statistics and Probability
Authors
Enrique Sentana, Giorgio Calzolari, Gabriele Fiorentini,