Monash University
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Do Jumps Matter? Forecasting Multivariate Realized Volatility allowing for Common Jumps

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journal contribution
posted on 2022-11-01, 04:52 authored by Yin Liao, Heather M. Anderson, Farshid Vahid
Realized volatility of stock returns is often decomposed into two distinct components that are attributed to continuous price variation and jumps. This paper proposes a tobit multivariate factor model for the jumps coupled with a standard multivariate factor model for the continuous sample path to jointly forecast volatility in three Chinese Mainland stocks. Out of sample forecast analysis shows that separate multivariate factor models for the two volatility processes outperform a single multivariate factor model of realized volatility, and that a single multivariate factor model of realized volatility outperforms univariate models.

History

Classification-JEL

C13, C32, C52, C53, G17, G32

Creation date

2010-05

Working Paper Series Number

11/10

Length

44 pages

File-Format

application/pdf

Handle

RePEc:msh:ebswps:2010-11

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