Realized Matrix-Exponential Stochastic Volatility with Asymmetry, Long Memory and Spillovers

The paper develops a novel realized matrix-exponential stochastic volatility model of multivariate returns and realized covariances that incorporates asymmetry and long memory (hereafter the RMESV-ALM model). The matrix exponential transformation guarantees the positivedefiniteness of the dynamic covariance matrix. The contribution of the paper ties in with Robert Basmann’s seminal work in terms of the estimation of highly non-linear model specifications (“Causality tests and observationally equivalent representations of econometric models”, Journal of Econometrics, 1988, 39(1-2), 69–104), especially for developing tests for leverage and spillover effects in the covariance dynamics. Efficient importance sampling is used to maximize the likelihood function of RMESV-ALM, and the finite sample properties of the quasi-maximum likelihood estimator of the parameters are analysed. Using high frequency data for three US financial assets, the new model is estimated and evaluated. The forecasting performance of the new model is compared with a novel dynamic realized matrix-exponential conditional covariance model. The volatility and co-volatility spillovers are examined via the news impact curves and the impulse response functions from returns to volatility and co-volatility.

Low spatial frequency filtering modulates early brain processing of affective complex pictures

Recent research on affective processing has suggested that low spatial frequency information of fearful faces provide rapid emotional cues to the amygdala, whereas high spatial frequencies convey fine-grained information to the fusiform gyrus, regardless of emotional expression. In the present experiment, we examined the effects of low (LSF, <15 cycles/image width) and high spatial frequency filtering (HSF, >25 cycles/image width) on brain processing of complex pictures depicting pleasant, unpleasant, and neutral scenes. Event-related potentials (ERP), percentage of recognized stimuli and response times were recorded in 19 healthy volunteers. Behavioral results indicated faster reaction times in response to unpleasant LSF than to unpleasant HSF pictures. Unpleasant LSF pictures and pleasant unfiltered pictures also elicited significant enhancements of P1 amplitudes at occipital electrodes as compared to neutral LSF and unfiltered pictures, respectively; whereas no significant effects of affective modulation were found for HSF pictures. Moreover, mean ERP amplitudes in the time between 200 and 500ms post-stimulus were significantly greater for affective (pleasant and unpleasant) than for neutral unfiltered pictures; whereas no significant affective modulation was found for HSF or LSF pictures at those latencies. The fact that affective LSF pictures elicited an enhancement of brain responses at early, but not at later latencies, suggests the existence of a rapid and preattentive neural mechanism for the processing of motivationally relevant stimuli, which could be driven by LSF cues. Our findings confirm thus previous results showing differences on brain processing of affective LSF and HSF faces, and extend these results to more complex and social affective pictures.