How Can We Interpret the Estimates of the Full BEKK Model with Asymmetry? The Case of French and German Stock Returns

Chikashi Tsuji

Abstract


This study conducts careful interpretations of the model parameters from the full Baba-Engle-Kraft-Kroner (BEKK) model with asymmetric effects. This study also includes a case study, in which we interpret the full BEKK model parameter estimates from the empirical examinations using French and German stock index returns. More concretely, in this paper, we firstly examine the model formula and obtain general interpretations of the full BEKK model parameters. This shall be particularly helpful to understand not only the structure of the full BEKK model but also the mechanisms of similar multivariate generalized autoregressive conditional heteroscedasticity (MGARCH) models. After the above general considerations, this study also interprets the case results, in which the full BEKK model is applied to French and German stock index returns. The concrete illustrations demonstrated in this case study shall be also very useful for future related research.


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DOI: https://doi.org/10.5296/ber.v7i2.12071

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Business and Economic Research  ISSN 2162-4860

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