Template-type: ReDIF-Paper 1.0
Author-Name: Yasuhiro Omori
Author-Workplace-Name: University of Tokyo
Author-Name: Siddhartha Chib
Author-Workplace-Name: Washington University
Author-Name: Neil Shephard
Author-Email: neil.shephard@nuffield.ox.ac.uk
Author-Workplace-Name: Nuffield College, University of Oxford, UK
Author-Name: Jouchi Nakajima
Author-Workplace-Name: University of Tokyo
Title: Stochastic volatility with leverage: fast likelihood inference
Abstract:Kim, Shephard and Chib (1998) provided a Bayesian analysis of stochastic
volatility models based on a very fast and reliable Markov chain Monte Carlo (MCMC)
algorithm. Their method ruled out the leverage effect, which limited its scope for 
applications. Despite this, their basic method has been extensively used in financial
economics literature and more recently in macroeconometrics. In this paper we show how 
to overcome the limitation of this analysis so that the essence of the Kim, Shephard 
and Chib (1998) can be used to deal with the leverage effect, greatly extending the 
applicability of this method. Several illustrative examples are provided. 
Keywords:  Leverage effect, Markov chain Monte Carlo, Mixture sampler, Stochastic volatility, Stock returns.
Length: 23 pages
Creation-Date:2004-08-22
Number:2004-W19
File-URL: http://www.nuff.ox.ac.uk/economics/papers/2004/w19/mixture28.pdf
File-Format: application/pdf
Handle: RePEc:nuf:econwp:0419