A Bayesian Markov-Switching Correlation Model for Contagion Analysis on Exchange Rate Markets
Bibliographic Data
| ID | 19418489 |
|---|---|
| Authors | Roberto Casarin (0000-0003-1746-9190, Departments of Economics, University Ca’ Foscari of Venice, Italy ()), Domenico Sartore (0000-0002-4017-5062, Departments of Economics, University Ca’ Foscari of Venice, Italy ()), Marco Tronzano (0000-0003-4535-1149, University of Genoa) |
| Year | 2018 |
| Volume | 36 |
| Issue | 1 |
| Pages | 101-114 |
| Publication date | 2018-01-02 |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Business and Economic Statistics (JOURNAL) |
| Journal identifiers | ISSN: 0735-0015 • E-ISSN: 1537-2707 |
| Publisher | Informa UK Limited (PUBLISHER • GB) |
| DOI | 10.1080/07350015.2015.1137757 |
| OpenAlex | W2266655910 |
| Language | EN |
| Citations received | 1 |
| References cited | 57 |
This article develops a new Markov-switching vector autoregressive (VAR) model with stochastic correlation for contagion analysis on financial markets. The correlation and the log-volatility dynamics are driven by two independent Markov chains, thus allowing for different effects such as volatility spill-overs and correlation shifts with various degrees of intensity. We outline a suitable Bayesian inference procedure based on Markov chain Monte Carlo algorithms. We then apply the model to some major and Asian-Pacific cross rates against the U.S. dollar and find strong evidence supporting the existence of contagion effects and correlation drops during crises, closely in line with the stylized facts outlined in the contagion literature. A comparison of this model with its closest competitors, such as a time-varying parameter VAR, reveals that our model has a better predictive ability.
Autoregressive conditional heteroskedasticity · Autoregressive model · Bayesian inference · Bayesian probability · Econometrics · Economics · Markov chain · Markov chain Monte Carlo · Statistics · Stylized fact · Computer Science · Financial Risk and Volatility Modeling · Market Dynamics and Volatility · Mathematics · Monetary Policy and Economic Impact
Multivariate GARCH models
The Calculation of Posterior Distributions by Data Augmentation
Bayesian model averaging
Time Varying Structural Vector Autoregressions and Monetary Policy
Multivariate Simultaneous Generalized ARCH
Were There Regime Switches in U.S. Monetary Policy?
Econometric measures of connectedness and systemic risk in the finance and insurance sectors
Strictly Proper Scoring Rules, Prediction, and Estimation
Bayes Factors
Macroeconomics and Reality
Selection of Multivariate Stochastic Volatility Models via Bayesian Stochastic Search
Dynamic Conditional Correlation
A Stochastic Volatility Model With Markov Switching
Real-Time Density Forecasts From Bayesian Vector Autoregressions With Stochastic Volatility
Multivariate Stochastic Volatility via Wishart Processes
Bayesian Inference in Regime-Switching Arma Models With Absorbing States
Bayesian Dynamic Factor Models and Portfolio Allocation
A Dynamic Multivariate Heavy-Tailed Model for Time-Varying Volatilities and Correlations
The Gaussian Mixture Dynamic Conditional Correlation Model
Bayesian Analysis of Stochastic Volatility Models
Modelling the Coherence in Short-Run Nominal Exchange Rates
A Capital Asset Pricing Model with Time-Varying Covariances
| Citations per year | 0.5 |
|---|---|
| Citation span | 2024 - 2024 (1) |
| Highly cited | No |