Quotation Kastner, Gregor, Frühwirth-Schnatter, Sylvia, Lopes, Hedibert Freitas. 2014. Analysis of Exchange Rates via Multivariate Bayesian Factor Stochastic Volatility Models. In The Contribution of Young Researchers to Bayesian Statistics, Proceedings of BAYSM2013, Springer Proceedings in Mathematics & Statistics, Vol. 63, Hrsg. Ettore Lanzarone and Francesca Ieva, 181-185. Switzerland: Springer.


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Abstract

Multivariate factor stochastic volatility (SV) models are increasingly used for the analysis of multivariate financial and economic time series because they can capture the volatility dynamics by a small number of latent factors. The main advantage of such a model is its parsimony, as the variances and covariances of a time series vector are governed by a low-dimensional common factor with the components following independent SV models. For high-dimensional problems of this kind, Bayesian MCMC estimation is a very efficient estimation method; however, it is associated with a considerable computational burden when the dimensionality of the data is moderate to large. To overcome this, we avoid the usual forward-filtering backward-sampling (FFBS) algorithm by sampling "all without a loop" (AWOL), consider various reparameterizations such as (partial) noncentering, and apply an ancillarity-sufficiency interweaving strategy (ASIS) for boosting MCMC estimation at a univariate level, which can be applied directly to heteroskedasticity estimation for latent variables such as factors. To show the effectiveness of our approach, we apply the model to a vector of daily exchange rate data.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Contribution to conference proceedings
Language English
Title Analysis of Exchange Rates via Multivariate Bayesian Factor Stochastic Volatility Models
Title of whole publication The Contribution of Young Researchers to Bayesian Statistics, Proceedings of BAYSM2013, Springer Proceedings in Mathematics & Statistics, Vol. 63
Editor Ettore Lanzarone and Francesca Ieva
Page from 181
Page to 185
Location Switzerland
Publisher Springer
Year 2014
ISBN 978-3-319-02083-9
URL http://link.springer.com/book/10.1007%2F978-3-319-02084-6

Associations

People
Kastner, Gregor (Details)
Frühwirth-Schnatter, Sylvia (Details)
External
Lopes, Hedibert Freitas (The University of Chicago Booth School of Business, United States/USA)
Organization
Institute for Statistics and Mathematics IN (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
1105 Computer software (Details)
1162 Statistics (Details)
5323 Econometrics (Details)
5701 Applied statistics (Details)
5707 Time series analysis (Details)
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