Business Intelligence

Semiparametric Vector MEM

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Executive Summary

In financial time series analysis the authors encounter several instances of non - negative valued processes which exhibit clustering and can be modeled as the product of a vector of conditionally autoregressive scale factors and a multivariate iid innovation process. Two novel points are introduced in this paper relative to previous suggestions: a more general specification which sets this vector MEM apart from an equation by equation specification; and the adoption of a GMM-based approach which bypasses the complicated issue of specifying a general multivariate non - negative valued innovation process.

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