Efficient Bayesian Inference for Multivariate Factor Stochastic Volatility Models

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Authors Gregor Kastner, Sylvia Fr├╝hwirthSchnatter, Hedibert Freitas Lopes
Paper Category
Paper Abstract ABSTRACTWe discuss efficient Bayesian estimation of dynamic covariance matrices in multivariate time series through a factor stochastic volatility model. In particular, we propose two interweaving strategies to substantially accelerate convergence and mixing of standard MCMC approaches. Similar to marginal data augmentation techniques, the proposed acceleration procedures exploit nonidentifiability issues which frequently arise in factor models. Our new interweaving strategies are easy to implement and come at almost no extra computational cost; nevertheless, they can boost estimation efficiency by several orders of magnitude as is shown in extensive simulation studies. To conclude, the application of our algorithm to a 26-dimensional exchange rate dataset illustrates the superior performance of the new approach for real-world data. Supplementary materials for this article are available online.
Date of publication 2017
Code Programming Language R

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