Dynamic conditional correlation multivariate GARCH

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Joined: Wed Jan 03, 2018 10:50 am

Re: Dynamic conditional correlation multivariate GARCH

Postby sam86 » Wed Jan 03, 2018 12:39 pm

is the three-stage estimation method of the DCC-GARCH available, the addin has only the 2 step estimation method,

Help is much appreciated,

Posts: 2
Joined: Thu May 12, 2016 4:27 am

Re: Dynamic conditional correlation multivariate GARCH

Postby arorasunita67 » Wed Jun 05, 2019 5:29 am

Hvtcapollo wrote:You can consider this code. I used it last year for my research and you should be ok if using it for the bivariate. For trivariate u need to modify a litle bit especially for the log likelihood function.

Code: Select all

'change path to program path
cd %path

'load workfile containing the return series
load nikkei_sp.WF1

'set sample range
sample s1 1/06/1995 12/25/2007
scalar pi=3.14159

'defining the return series in terms of y1 and y2
series y1=r_nikkei
series y2=r_sp

'fitting univariate GARCH(1,1) models to each of the two returns series
equation eq_y1.arch(1,1,m=1000,h) y1 c
equation eq_y2.arch(1,1,m=1000,h) y2 c

'extract the standardized residual series from the GARCH fit
eq_y1.makeresids(s) z1
eq_y2.makeresids(s) z2

'extract garch series from univariate fit
eq_y1.makegarch() garch1
eq_y2.makegarch() garch2

'Caculate sample variance of series z1, z2 and covariance of z1and z2 and correlation between z1 and z2
scalar var_z1=@var(z1)
scalar var_z2=@var(z2)
scalar cov_z1z2=@cov(z1,z2)
scalar corr12=@cor(z1,z2)

'defining the starting values for the var(z1) var(z2) and covariance (z1,z2)
series var_z1t=var_z1
series var_z2t=var_z2
series cov_z1tz2t=cov_z1z2

'declare the coefficient starting values
coef(2) T

' ...........................................................
' LOG LIKELIHOOD for correlation part
' set up the likelihood
' 1) open a new blank likelihood object and name it 'dcc'
' 2) specify the log likelihood model by append
' ...........................................................

logl dcc
dcc.append @logl logl

'specify var_z1t, var_z2t, cov_z1tz2t
dcc.append var_z1t=@nan(1-T(1)-T(2)+T(1)*(z1(-1)^2)+T(2)*var_z1t(-1),1)
dcc.append var_z2t=@nan(1-T(1)-T(2)+T(1)*(z2(-1)^2)+T(2)*var_z2t(-1),1)
dcc.append cov_z1tz2t=@nan((1-T(1)-T(2))*corr12+T(1)*z1(-1)*z2(-1)+T(2)*cov_z1tz2t(-1),1)

dcc.append pen=(var_z1t<0)+(var_z2t<0)

'specify rho12
dcc.append rho12=cov_z1tz2t/@sqrt(@abs(var_z1t*var_z2t))

'defining the determinant of correlation matrix and determinant of Dt
dcc.append detrRt=(1-(rho12^2))
dcc.append detrDt=@sqrt(garch1*garch2)
dcc.append pen=pen+(detrRt<0)
dcc.append detrRt=@abs(detrRt)

'define the log likelihood function
dcc.append logl=(-1/2)*(2*log(2*pi)+log(detrRt)+(z1^2+z2^2-2*rho12*z1*z2)/detrRt)-10*pen

'estimate the model
smpl s1
dcc.ml(showopts, m=500, c=1e-5)

'display output and graphs
show dcc.output
graph corr.line rho12
show corr

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Joined: Thu May 12, 2016 4:27 am

Re: Dynamic conditional correlation multivariate GARCH

Postby arorasunita67 » Wed Jun 05, 2019 5:34 am

vivian wrote:Thanks very much for sharing the code. I used this code for my research as well, it turned out that there is always an error box saying " Missing values in @LOGL series at current coefficients at observation 1 in 'DO_DCC.ML(SHOWOPTS, M=500,C=1E-5)' "

Could you guys tell me where went wrong? I will really appreciate your help ....

so sad ....

Change your starting sample date from 3rd observation @last
I want to say in program start your sample from 3rd observation to last
It worked for me

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