A factor approach to realized volatility forecasting in the presence of finite jumps and cross-sectional correlation in pricing errors

Atak, A. & Kapetanios, G. (2013). A factor approach to realized volatility forecasting in the presence of finite jumps and cross-sectional correlation in pricing errors. Economics Letters, 120(2), pp. 224-228. doi: 10.1016/j.econlet.2013.03.051

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Abstract

There is a growing literature on the realized volatility (View the MathML source) forecasting of asset returns using high-frequency data. We explore the possibility of forecasting View the MathML source with factor analysis; once considering the significant jumps. A real high-frequency financial data application suggests that the factor based approach is of significant potential interest and novelty.

Item Type: Article
Additional Information: © 2013, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Uncontrolled Keywords: Realized volatility; Bipower variation; Jump tests; Factor models; Volatility forecasting; Model selection
Subjects: H Social Sciences > HB Economic Theory
Divisions: School of Social Sciences > Department of Economics
URI: http://openaccess.city.ac.uk/id/eprint/7630

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