GARCHDECO—Dynamic Equicorrelation (DECO)

[TomDoan]

GARCHDECO.RPF uses one of the standard RATS example data files for demonstrating the DECO model of Engle and Kelly(2012), "Dynamic Equicorrelation", JBES, vol 30, no 2, 212-228. (Not a great choice for the technique, since the Canadian exchange rate has a low correlation with the others—this should be applied to a set of variables which have relatively similar pairwise cross correlations).

Detailed description

g10xrate.xls

Data file

(1.2 MiB) Downloaded 1984 times

[xray]

Hi,

Is it possible to form the minimum variance and global minimum variance portfolios as done in the DECO paper (http://papers.ssrn.com/sol3/papers.cfm? ... id=1354525) using matrix algebra in RATS?

Thanks!

[TomDoan]

Hi,

Is it possible to form the minimum variance and global minimum variance portfolios as done in the DECO paper (http://papers.ssrn.com/sol3/papers.cfm? ... id=1354525) using matrix algebra in RATS?

Thanks!

Their process would take a lot of programming. Calculating the portfolios is simple given the covariance matrices. However, in order to avoid biasing the results, they run rolling estimates, but in order to avoid the cost of running too many optimization problems, they re-estimate only once in 22 periods, and do a sequence of 22 one-step predictions, using the last set of estimates. They also cut out the description of how to forecast the "rho" out-of-sample from an earlier working paper. It isn't analytical and they gave two different expressions, so it's not clear which they recommend.

[xray]

The version of this just posted now computes the covariance matrices as the SERIES[SYMMETRIC] called HH.

Thanks.

Is it possible to display this in the matrix form

HH =
hh11............hh1,8
...................
...................
hh1,8...........hh8,8

The print and display commands don't seem to work

[TomDoan]

There is one HH matrix per time period. You can do

DISPLAY HH(100)

to get the HH matrix at T=100, and the same for any other data point.

[hungufm]

Dear Tom,

Please help me find the average correlation coefficient in DECO model s the following paper:

(https://www.sciencedirect.com/science/a ... 7119310416)

As the sample codes shown, I did not see this figure.

Your help would be appreciated,

Regards,
Ngo

[TomDoan]

Wouldn't that just the the RHO series that's being computed by the program?

[hungufm]

Dear Tom,

In rats, I run regression model for example, then i want to gain residual data of the model. I mean I have to print the residual into excel file. What should I do?

Return my case, could you show me how can I print RHO series into excel or rats file?

Thanks in advance,

[TomDoan]

RHO is a SERIES so you can do with it anything that you could do with any other SERIES. In particular, you can use COPY to create an Excel file.