Universidad Complutense de Madrid
E-Prints Complutense

The Fiction of Full BEKK: Pricing Fossil Fuels and Carbon Emissions

Impacto

Downloads

Downloads per month over past year



Chang, Chia-Lin and McAleer, Michael (2018) The Fiction of Full BEKK: Pricing Fossil Fuels and Carbon Emissions. [ Documentos de Trabajo del ICAE; nº 08, 2018, ] (Unpublished)

[img]
Preview
PDF
526kB


Abstract

The purpose of the paper is to (i) show that univariate GARCH is not a special case of multivariate GARCH, specifically the Full BEKK model, except under parametric restrictions on the off-diagonal elements of the random coefficient autoregressive coefficient matrix, that are not consistent with Full BEKK, and (ii) provide the regularity conditions that arise from the underlying random coefficient autoregressive process, for which the (quasi-) maximum likelihood estimates (QMLE) have valid asymptotic properties under the appropriate parametric restrictions. The paper provides a discussion of the stochastic processes that lead to the alternative specifications, regularity conditions, and asymptotic properties of the univariate and multivariate GARCH models. It is shown that the Full BEKK model, which in empirical practice is estimated almost exclusively compared with Diagonal BEKK (DBEKK), has no underlying stochastic process that leads to its specification, regularity conditions, or asymptotic properties, as compared with DBEKK. An empirical illustration shows the differences in the QMLE of the parameters of the conditional means and conditional variances for the univariate, DEBEKK and Full BEKK specifications.


Item Type:Working Paper or Technical Report
Additional Information:

Revised: March 2018.
The authors are most grateful to the Editor and a reviewer for very helpful comments and suggestions. For financial support, the first author wishes to thank the National Science Council, Ministry of Science and Technology (MOST), Taiwan, and the second author acknowledges the Australian Research Council and the National Science Council, Ministry of Science and Technology (MOST), Taiwan

Uncontrolled Keywords:Random coefficient stochastic process; Off-diagonal parametric restrictions; Diagonal BEKK; Full BEKK; Regularity conditions; Asymptotic properties; Conditional volatility; Univariate and multivariate models; Fossil fuels and carbon emissions.
Subjects:Social sciences > Economics > Econometrics
Social sciences > Economics > Economic indicators
JEL:C22, C32, C52, C58
Series Name:Documentos de Trabajo del ICAE
Volume:2018
Number:08
ID Code:48487
Deposited On:04 Jul 2018 12:08
Last Modified:04 Jul 2018 12:08

Origin of downloads

Repository Staff Only: item control page