Identifying structural shocks to volatility through a proxy-MGARCH model
Type
journal article
Author(s)
Polivka, Jeannine
;
Fengler, Matthias R.
Abstract
We extend the classical MGARCH specification for volatility modeling by developing a structural MGARCH model targeting identification of shocks and volatility spillovers in a speculative return system. Similarly to the proxy-sVAR framework, we work with auxiliary proxy variables constructed from news-related measures to identify the underlying shock system. We achieve full identification with multiple proxies by chaining Givens rotations. In an empirical application, we identify an equity, bond and currency shock. We study the volatility spillovers implied by these labelled structural shocks. Our analysis shows that symmetric spillover regimes are rejected.
Funding(s)
Language
English
Keywords
Givens rotations
identification
news-based measures
proxy-MGARCH
shock labelling
structural innovations
volatility spillovers
Refereed
No
Subject(s)
Eprints ID
263345
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Name
FenglerPolivka2021.pdf
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Format
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