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A Hybrid Data Cloning Maximum Likelihood Estimator for Stochastic Volatility Models

Author

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  • Laurini Márcio Poletti

    (Department of Economics, FEA-RP USP and associated researcher at CNPq, Ribeirão Preto, São Paulo, Brazil)

Abstract
In this article, we analyze a maximum likelihood estimator using Data Cloning for Stochastic Volatility models. This estimator is constructed using a hybrid methodology based on Integrated Nested Laplace Approximations to calculate analytically the auxiliary Bayesian estimators with great accuracy and computational efficiency, without requiring the use of simulation methods such as Markov Chain Monte Carlo. We analyze the performance of this estimator compared to methods based on Monte Carlo simulations (Simulated Maximum Likelihood, MCMC Maximum Likelihood) and approximate maximum likelihood estimators using Laplace Approximations. The results indicate that this data cloning methodology achieves superior results over methods based on MCMC, comparable to results obtained by the Simulated Maximum Likelihood estimator. The methodology is extended to models with leverage effects, continuous time formulations, multifactor and multivariate stochastic volatility.

Suggested Citation

  • Laurini Márcio Poletti, 2013. "A Hybrid Data Cloning Maximum Likelihood Estimator for Stochastic Volatility Models," Journal of Time Series Econometrics, De Gruyter, vol. 5(2), pages 193-229, May.
    • Handle: RePEc:bpj:jtsmet:v:5:y:2013:i:2:p:193-229:n:4
    DOI: 10.1515/jtse-2012-0025
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    Cited by:

    1. Pedro Chaim & Márcio Poletti Laurini, 2022. "Data Cloning Estimation and Identification of a Medium-Scale DSGE Model," Stats, MDPI, vol. 6(1), pages 1-13, December.

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    More about this item

    Keywords

    Stochastic Volatility; Data Cloning; Maximum Likelihood; MCMC; Laplace Approximations;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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