2026-06-29T09:24:57Zhttps://docta.ucm.es/rest/oai/requestoai:docta.ucm.es:20.500.14352/492502023-11-14T07:19:20Zcom_20.500.14352_14col_20.500.14352_17
Do We Really Need Both BEKK and DCC? A Tale of Two Covariance Models
Caporin, Massimiliano
McAleer, Michael
G11
G33
C32
Conditional correlations
Conditional covariances
Diagonal models
Forecasting
Generalized models
Hadamard models
Scalar models
Targeting.
Estadística matemática (Estadística)
1209 Estadística
Massimiliano Caporin pertenece al Dipartimento di Scienze Economiche “Marco Fanno”, Università degli Studi di Padova,Facoltà di Scienze Statistiche.
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.
Fac. de Ciencias Económicas y Empresariales
Instituto Complutense de Análisis Económico (ICAE)
TRUE
unpub
2023-06-20T09:17:36Z
2023-06-20T09:17:36Z
2009-02
technical report
https://hdl.handle.net/20.500.14352/49250
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spa
Documentos de trabajo del Instituto Complutense de Análisis Económico (ICAE)
open access
application/pdf
Instituto Complutense de Análisis Económico. Universidad Complutense de Madrid