A Generalized Heterogeneous Autoregressive Model using the Market Index

Hizmeri, Rodrigo and Izzeldin, Marwan and Nolte, Ingmar and Pappas, Vasileios (2022) A Generalized Heterogeneous Autoregressive Model using the Market Index. Quantitative Finance, 22 (8). pp. 1513-1534. ISSN 1469-7688

[img]
Text (SSRN-id3496804)
SSRN_id3496804.pdf - Accepted Version
Restricted to Repository staff only until 2 December 2023.
Available under License Creative Commons Attribution-NonCommercial.

Download (1MB)

Abstract

This paper introduces a novel class of volatility forecasting models that incorporate market realized (co)variances and semi(co)variances within the framework of a heterogeneous autoregressive (HAR) model. Our empirical analysis shows statistically and economically significant forecasting gains. For our most parsimonious market-HAR specification, stock volatility forecasting is improved by 9.80% points. Using a mixed sampling frequency market-HAR variant with low (high) sampling frequency for the stock (market) improves forecasting by a further 6.90% points. Our paper also develops noise-robust estimators to facilitate the use of realized semi(co)variances at high sampling frequencies.

Item Type:
Journal Article
Journal or Publication Title:
Quantitative Finance
Additional Information:
This is an Accepted Manuscript of an article published by Taylor & Francis in Quantitative Finance on 02/06/2022, available online: http://www.tandfonline.com/10.1080/14697688.2022.2076606
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2000
Subjects:
ID Code:
170334
Deposited By:
Deposited On:
13 May 2022 12:10
Refereed?:
Yes
Published?:
Published
Last Modified:
22 Nov 2022 11:27