Dynamic density forecasts for multivariate asset returns

E Stoja, A. Polanski

Research output: Contribution to journalArticle (Academic Journal)peer-review

1 Citation (Scopus)

Abstract

We propose a simple and flexible 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.
Translated title of the contributionDynamic density forecasts for multivariate asset returns
Original languageEnglish
Pages (from-to)523 - 540
Number of pages18
JournalJournal of Forecasting
Volume30
Issue number6
DOIs
Publication statusPublished - Sep 2011

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