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.
matrix, multivariate time series or
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;
An object of class 'geovol'.
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.
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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)
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