Forecasting downside and upside realized volatility: The role of asymmetric information

Daiki Maki

The Journal of Economic Asymmetries, 2024, vol. 29, issue C

Abstract: This study examines which asymmetric variables lead to the better forecast performance of downside and upside risks. The models used in this study measure downside and upside risks using realized semivariance. In addition to their past values, the models utilize return, volume, and jump components as asymmetric variables. We apply these models to major exchange-traded funds (ETFs) and show that asymmetric return variables increase the forecast performance of downside and upside risks for all ETFs. For bond, commodity, and crude oil ETFs, asymmetric trading volume variables are also found to be an important factor in better forecast performance. These results indicate that asymmetric information plays an important role in forecasting downside and upside risks, enabling superior risk management and investment strategy formulation.

Keywords: Upside and downside risks; Asymmetric information; Forecast performance; Exchange-traded funds (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:29:y:2024:i:c:s1703494924000069

DOI: 10.1016/j.jeca.2024.e00357

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