Pan, Jiazhu and Polonik, Wolfgang and Yao, Qiwei (2010) Estimating factor models for multivariate volatilities: an innovation expansion approach. [Proceedings Paper]
We introduce an innovation expansion method for estimation of factor models for conditional variance (volatility) of a multivariate time series.We estimate the factor loading space and the number of factors by a stepwise optimization algorithm on expanding the white noise space". Simulation and a real data example are given for illustration.
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