Volatility Impulse Response Functions for Multivariate Garch Models.

In the empirical analysis of financial time series, multivariate GARCH models have been used in various forms. In most cases it is not well understood how the use of a restricted model has to be paid with loss of valuable information. We investigate the structural implications of two alternative models for the response of the conditional (co-)variances to independent shocks. The impulse response analysis, adopted to volatility models, appears to be a convenient methodology to obtain information on the interaction of financial series.