Dynamic density forecasts for multivariate asset returns
✍ Scribed by Arnold Polanski; Evarist Stoja
- Publisher
- John Wiley and Sons
- Year
- 2010
- Tongue
- English
- Weight
- 414 KB
- Volume
- 30
- Category
- Article
- ISSN
- 0277-6693
- DOI
- 10.1002/for.1192
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✦ Synopsis
We propose a simple and fl exible framework for forecasting the joint density of asset returns. The multinormal distribution is augmented with a polynomial in (time-varying) non-central co-moments of assets. We estimate the coefficients of the polynomial via the method of moments for a carefully selected set of co-moments. In an extensive empirical study, we compare the proposed model with a range of other models widely used in the literature. Employing a recently proposed as well as standard techniques to evaluate multivariate forecasts, we conclude that the augmented joint density provides highly accurate forecasts of the 'negative tail' of the joint distribution.