Abstract
AbstractWe propose a multivariate time series model to forecast the returns and volatilities of 15 European financial markets. Using the approach of mean‐variance portfolios we develop several strategies which are based on the predictions of high‐dimensional VAR‐GARCH models for future volatilities. We explore the value of volatility timing strategies by simplifying the forecasting model. One approach for information blocking is based on factor analysis for the returns. Finally we discuss if multivariate volatility timing strategies are successful for beating the benchmark index (the MSCI Europe index). Copyright © 2004 John Wiley & Sons, Ltd.
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