RT Report
T1 The Fiction of Full BEKK: Pricing Fossil Fuels and Carbon Emissions
A1 Chang, Chia-Lin
A1 McAleer, Michael
AB 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.
SN 2341-2356
YR 2018
FD 2018-03
LK https://hdl.handle.net/20.500.14352/17428
UL https://hdl.handle.net/20.500.14352/17428
LA eng
NO 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
DS Docta Complutense
RD 18 abr 2025