TY - JOUR N2 - The first so-called hybrid MSV-MGARCH models were characterized by the conditional covariance matrix that was a product of a univariate latent process and a matrix with a simple MGARCH structure (Engle’s DCC or scalar BEKK). The aim was to parsimoniously describe volatility of a large group of assets. The proposed hybrid models, similarly as pure MSV specifications (and other models based on latent processes), required the Bayesian approach equipped with efficient MCMC simulation tools. The numerical effort has payed – the hybrid models seem particularly useful due to their good fit and ability to jointly cope with large portfolios. In particular, the simplest hybrid, now called the MSF-SBEKK model, has been successfully used in many applications. However, one latent process may be insufficient in the case of a highly heterogeneous portfolio. Thus, in this study we discuss a general hybrid MSV-MGARCH model structure, showing its basic characteristics that explain greater flexibility of such hybrid structure with respect to the corresponding MGARCH class. From the empirical perspective, we advocate the GMSF-SBEKK specification, which uses as many latent processes as there are relatively homogeneous groups of assets. We present full Bayesian inference for such models, with the use of an efficient MCMC simulation strategy. The approach is used to jointly model volatility on very different markets. Joint modelling is formally compared to individual modelling of volatility on each market. L1 - http://journals.pan.pl/Content/103712/PDF-MASTER/mainFile.pdf L2 - http://journals.pan.pl/Content/103712 PY - 2016 IS - No 4 EP - 271 DO - 10.24425/cejeme.2016.119198 KW - Bayesian econometrics KW - multivariate volatility models KW - MGARCH processes KW - MSV processes KW - financial markets KW - commodity markets A1 - Osiewalski, Jacek A1 - Osiewalski, Krzysztof PB - Oddział PAN w Łodzi DA - 31.12.2016 T1 - Hybrid MSV-MGARCH Models - General Remarks and the GMSF-SBEKK Specification SP - 241 UR - http://journals.pan.pl/dlibra/publication/edition/103712 T2 - Central European Journal of Economic Modelling and Econometrics ER -