geovol {geovol}

Estimate GEOVOL and GEOVOL loadings

Description

Maximum likehlihood estimation of the GEOVOL and GEOVOL loadings. Estimation is carried out as a maximization-maximization procedure, where the latent multiplicative volatility factor and the factor loadings are estimated iteratively until convergence. Either a balanced or an unbalanced panel can be used. For each point in time t, GEOVOL is estimated using all the available values in the cross-section. The GEOVOL loadings are estimated for each time series.

Usage

  geovol(e, initial.values = list()) 

Arguments

e

matrix, multivariate time series or zoo object of volatility standardized residuals with mean zero and unit variance.

initial.values

a list containing the initial parameter values passed on to the optimization routine (optim for the GEOVOL factor and loadings. If list(), the default, then the values are chosen automatically; x - NULL or numeric vector containing the n initial values for the GEOVOL factor, x_{t}, t=1,...,n. s - NULL or numeric vector containing the m initial values for the GEOVOL loadings, s_{i}, i=1,...,m.

Value

An object of class 'geovol'.

Author(s)

Susana Campos-Martins

References

Engle, R.F. and Campos-Martins, S. (2020) Measuring and hedging geopolitical risk. Available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3685213.

See Also

geovol, geovolSim, geovolTest, optim,

Examples

set.seed(123)

## Simulate from a GEOVOL model (default):
eSim <- geovolSim(n = 1000,  m = 30)

## Test for GEOVOL
geovolTest(e = eSim^2-1)

## Estimate a GEOVOL model:
geovolEst <- geovol(e = eSim)

## Print estimation results:
print(geovolEst)

## Extract coefficients:
coef(geovolEst)

## Extract and store GEOVOL:
sigma2Est <- fitted(geovolEst)

## Extract optimised log-likelihood values:
logLik(geovolEst)

## Extract and store GEOVOL standardised residuals:
etaEst <- residuals(geovolEst)