A generalized heterogeneous autoregressive model using market information

Hizmeri, Rodrigo and Izzeldin, Marwan and Nolte, Ingmar and Pappas, Vasileios (2022) A generalized heterogeneous autoregressive model using market information. Quantitative Finance, 22 (8). pp. 1513-1534. ISSN 1469-7688

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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
Uncontrolled Keywords:
?? realized volatilitymicrostructure noisepre-averaged estimatorssemi-variancesemi-covariancevolatility forecastingfinanceeconomics, econometrics and finance(all) ??
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Deposited On:
13 Jun 2022 11:20
Last Modified:
16 Apr 2024 01:26