We discuss several multivariate extensions of the Multiplicative Error Model to take into account dynamic interdependence and contemporaneously correlated innovations (vector MEM or vMEM). We suggest copula functions to link Gamma marginals of the innovations, in a specification where past...

The Multiplicative Error Model for nonnegative valued processes is specified as the product of a (conditionally autoregressive) scale factor and an innovation process with nonnegative support. A multivariate extension allows the innovations to be contemporaneously correlated. The estimation...

We develop a new parameter stability test against the alternative of observation driven generalized autoregressive score dynamics. The new test generalizes the ARCH-LM test of Engle (1982) to settings beyond time-varying volatility and exploits any autocorrelation in the likelihood scores under...