This paper discusses the effects of temporal aggregation on causality and forecasting in multivariate GARCH processes. It is shown that spurious instantaneous causality in variance will only appear in degenerated cases, but that spurious Granger causality will be more common. For forecasting...

A puzzling characteristic of asset returns for various frequencies is the often observed positive autocorrelation at lag one. To some extent this can be explained by standard asset pricing models when assuming time-varying risk premia. However, one often finds better results when directly...

This paper explains how the Gibbs sampler can be used to perform Bayesian inference on GARCH models. Although the Gibbs sampler is usually based on the analyti-cal knowledge of the full conditional posterior densities, such knowledge is not available in regression models with GARCH errors. We...

We develop a Markov-switching GARCH model (MS-GARCH) wherein the conditional mean and variance switch in time from one GARCH process to another. The switching is governed by a hidden Markov chain. We provide sufficient conditions for geometric ergodicity and existence of moments of the process....