RT Report
T1 Do We Really Need Both BEKK and DCC? A Tale of Two Covariance Models
A1 Caporin, Massimiliano
A1 McAleer, Michael
AB Large and very large portfolios of financial assets are routine for many individuals and organizations. The two most widely used models of conditional covariances and correlations are BEKK and DCC. BEKK suffers from the archetypal "curse of dimensionality" whereas DCC does not. This is a misleading interpretation of the suitability of the two models to be used in practice. The primary purposes of the paper are to define targeting as an aid in estimating matrices associated with large numbers of financial assets, analyze the similarities and dissimilarities between BEKK and DCC, both with and without targeting, on the basis of structural derivation, the analytical forms of the sufficient conditions for the existence of moments, and the sufficient conditions for consistency and asymptotic normality, and computational tractability for very large (that is, ultra high) numbers of financial assets, to present a consistent two step estimation method for the DCC model, and to determine whether BEKK or DCC should be preferred in practical applications.
PB Instituto Complutense de Análisis Económico. Universidad Complutense de Madrid
YR 2009
FD 2009-02
LK https://hdl.handle.net/20.500.14352/49250
UL https://hdl.handle.net/20.500.14352/49250
LA spa
NO Massimiliano Caporin pertenece al Dipartimento di Scienze Economiche “Marco Fanno”, Università degli Studi di Padova,Facoltà di Scienze Statistiche.
DS Docta Complutense
RD 19 mar 2026