The effect of realised volatility on stock returns risk estimates

Helena Veiga

DES - Working Papers. Statistics and Econometrics. WS from Universidad Carlos III de Madrid. Departamento de Estadística

Abstract: In this paper, we estimate minimum capital risk requirements for short, long positions and three investment horizons, using the traditional GARCH model and two other GARCH-type models that incorporate the possibility of asymmetric responses of volatility to price changes; and, most importantly, we analyse the models performance when realised volatility is included as an explanatory variable into the models' variance equations. The results suggest that the inclusion of realised volatility improves the models forecastability and their capacity to calculate accurate measures of minimum capital risk requirements.

Keywords: Asymmetry; High-Frequency; data; Minimum; capital; risk; requirements; Realised; volatility (search for similar items in EconPapers)
JEL-codes: C14 C15 G13 (search for similar items in EconPapers)
Date: 2007-09
New Economics Papers: this item is included in nep-fmk and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:cte:wsrepe:ws076316

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