This article proposes an adaptive forecast combination procedure, denoted as AEC, that tends to be similar to the use of the best available predictor in a time varying environment. In addition, a two-step procedure is proposed to allow the use of alternative combination procedures. In the first...

We propose a new conditionally heteroskedastic factor model, the GICA-GARCH model, which combines independent component analysis (ICA) and multivariate GARCH (MGARCH) models. This model assumes that the data are generated by a set of underlying independent components (ICs) that capture the...

GARCH volatilities depend on the unconditional variance, which is a non-linear function of the parameters. Consequently, they can have larger biases than estimated parameters. Using robust methods to estimate both parameters and volatilities is shown to outperform Maximum Likelihood procedures.

This note shows that the dimension reduction method proposed by Li & Shedden (2002) is equivalent to the dynamic factor model introduced by Peña & Box (1987). Copyright 2009, Oxford University Press.