CHANGE POINT DETECTION IN DYNAMIC GAUSSIAN GRAPHICAL MODELS: THE IMPACT OF COVID-19 PANDEMIC ON THE US STOCK MARKET

• 成果类型: Article
• 署名作者: Franzolini, Beatrice; Beskos, Alexandros; De Iorio, Maria; Koziell, Warrick Poklewski; Grzeszkiewicz, Karolina
• 署名单位: Bocconi University; University of London; University College London; National University of Singapore; Yale NUS College
• 刊物名称: ANNALS OF APPLIED STATISTICS
• ISSN/ISSBN: 1932-6157
• DOI: 10.1214/23-AOAS1801
• 发表日期: 2024
• 页码: 555-584
• 关键词: STOCHASTIC VOLATILITY MODELS; wishart distributions; bayesian-inference; Financial crisis; simulation; matrix; Lasso

摘要

Reliable estimates of volatility and correlation are fundamental in economics and finance for understanding the impact of macroeconomics events on the market and guiding future investments and policies. Dependence across financial returns is likely to be subject to sudden structural changes, especially in correspondence with major global events, such as the COVID19 pandemic. In this work we are interested in capturing abrupt changes over time in the conditional dependence across U.S. industry stock portfolios, over a time horizon that covers the COVID-19 pandemic. The selected stocks give a comprehensive picture of the U.S. stock market. To this end, we develop a Bayesian multivariate stochastic volatility model based on a time-varying sequence of graphs capturing the evolution of the dependence structure. The model builds on the Gaussian graphical models and the random change points literature. In particular, we treat the number, the position of change points, and the graphs as object of posterior inference, allowing for sparsity in graph recovery and change point detection. The high dimension of the parameter space poses complex computational challenges. However, the model admits a hidden Markov model formulation. This leads to the development of an efficient computational strategy, based on a combination of sequential MonteCarlo and Markov chain Monte-Carlo techniques. Model and computational development are widely applicable, beyond the scope of the application of interest in this work.