Multivariate Generalized Autoregressive Conditional Heteroscedastic Model

In this paper, by making use of the Hadamard product of matrices, a natural and reasonable generalization of the univariate GARCH (Generalized Autoregressive Conditional heteroscedastic) process introduced by Bollerslev (J. Econometrics 31(1986), 307-327) to the multivariate case is proposed. The conditions for the existence of strictly stationary and ergodic solutions and the existence of higher-order moments for this class of parametric models are derived.

Bayesian Estimation and Model Selection for the Spatiotemporal Autoregressive Model with Autoregressive Conditional Heteroscedasticity Errors

The spatial and spatiotemporal autoregressive conditional heteroscedasticity(STARCH) models receive increasing attention. In this paper, we introduce a spatiotemporal autoregressive(STAR) model with STARCH errors, which can capture the spatiotemporal dependence in mean and variance simultaneously. The Bayesian estimation and model selection are considered for our model. By Monte Carlo simulations, it is shown that the Bayesian estimator performs better than the corresponding maximum-likelihood estimator, and the Bayesian model selection can select out the true model in most times. Finally, two empirical examples are given to illustrate the superiority of our models in fitting those data.

Investigating the Existence of Second Order Spatial Autocorrelation in Crash Frequency across Adjacent Freeway Segments

This study developed spatial Poisson model to incorporate spatial autocorrelation in crash frequency across contagious freeway segments. Spatial autocorrelation is the presence of spatial pattern in crash frequency over space due to geographic proximity. Usually crash caused congestion on a freeway segment propagates upstream and creates chance of occurring secondary crashes. This phenomenon makes the crash frequency on the contiguous freeway segments correlated. This correlation makes the distributional assumption of independence of crash frequency invalid. The existence of spatial autocorrelation is investigated by using Conditional autoregressive models (CAR models). The models are set up in a Bayesian modeling framework, to include terms which help to identify and quantify residual spatial autocorrelation for neighboring observation units. Models which recognize the presence of spatial dependence help to obtain unbiased estimates of parameters quantifying safety levels since the effects of spatial autocorrelation are accounted for in the modeling process. Based on CAR models, approximately 51% of crash frequencies across contiguous freeway segments are spatially auto-correlated. The incident rate ratios revealed that wider shoulder and weaving segments decreased crash frequency by factors of 0.84 and 0.75 respectively. The marginal impacts graphs showed that an increase in longitudinal space for segments with two lanes decreased crash frequency. However, an increase of facility width above three lanes results in more crashes, which indicates an increase in traffic flows and driving behavior leading to crashes. These results call an important step of analyzing contagious freeway segments simultaneously to account for the existence of spatial autocorrelation.

Currency Exposure in China under the New Exchange Rate Regime： National Level Evidence

The present paper studies China＇s national level currency exposure since 2005 when the country adopted a new exchange rate regime allowing the renminbi （RMB） to move towards greater flexibility. Using generalized autoregressive conditional heteroskedastic and constant conditional correlation-generalized autoregressive conditional heteroskedastic methods to estimate the augmented capital asset pricing models with orthogonalized stock returns, we find that China equity indexes are significantly exposed to exchange rate movements. In a static setting, there is strong sensitivity of stock returns to movements of China＇s trade- weighted exchange rate, and to the bilateral exchange rates except the RMB/dollar rate. However, in a dynamic framework, exposure to all the bilateral currency pairs under examination is significant. The results indicate that under the new exchange rate regime, China＇s gradualist approach to moving towards greater exchange rate flexibility has managed to keep exposure to a moderate level. However, we find evidence that in a dynamic setting, the exposure of the RMB to the dollar and other major currencies is significant. For China, the challenge of managing currency risk exposure is looming greater.