Abstract
We propose a new estimation method for the factor loading matrix in modelling multivariate volatility processes. The key step of the method is based on the weighted scatter estimators, which does not involve optimizing any objective function. The method can therefore be easily applied to high‐dimensional systems without running into computational problems. The estimation is proved to be consistent and the asymptotic distribution is derived. The method inherits robust properties in dealing with ‘outlier’ clusters generated by GARCH processes. Through both simulation and real‐world case studies, we show that the method works well.
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