Ten Things You Should Know About the Dynamic Conditional Correlation Representation

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dc.contributor.authorCaporin, M.
dc.contributor.authorMcAleer, M.
dc.date.accessioned2015-10-19T01:14:16Z
dc.date.available2015-10-19T01:14:16Z
dc.date.issued2013en
dc.description.abstractThe purpose of the paper is to discuss ten things potential users should know about the limits of the Dynamic Conditional Correlation (DCC) representation for estimating and fore-casting time-varying conditional correlations. The reasons given for caution about the use of DCC include the following: DCC represents the dynamic conditional covariances of the stand-ardized residuals, and hence does not yield dynamic conditional correlations; DCC is stated rather than derived; DCC has no moments; DCC does not have testable regularity conditions; DCC yields inconsistent two step estimators; DCC has no asymptotic properties; DCC is not a special case of GARCC, which has testable regularity conditions and standard asymptotic prop-erties; DCC is not dynamic empirically as the effect of news is typically extremely small; DCC cannot be distinguished empirically from diagonal BEKK in small systems; and DCC may be a useful filter or a diagnostic check, but it is not a model.en
dc.identifier.citationCaporin, M., McAleer, M. (2013) Ten Things You Should Know About the Dynamic Conditional Correlation Representation. Department of Economics and Finance College of Business and Economics University of Canterbury..en
dc.identifier.urihttp://hdl.handle.net/10092/11245
dc.language.isoen
dc.publisherUniversity of Canterbury. Department of Economics and Financeen
dc.rights.urihttps://hdl.handle.net/10092/17651en
dc.subjectDCC representationen
dc.subjectBEKKen
dc.subjectGARCCen
dc.subjectstated representationen
dc.subjectderived modelen
dc.subjectcondi-tional covariancesen
dc.subjectconditional correlationsen
dc.subjectregularity conditionsen
dc.subjectmomentsen
dc.subjecttwo step estimatorsen
dc.subjectassumed propertiesen
dc.subjectasymptotic propertiesen
dc.subjectfilteren
dc.subjectdiagnostic checken
dc.subject.anzsrcField of Research::14 - Economicsen
dc.titleTen Things You Should Know About the Dynamic Conditional Correlation Representationen
dc.typeDiscussion / Working Papers
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