A Moving Average Heterogeneous Autoregressive Model for Forecasting the Realized Volatility of the US Stock Market: Evidence from Over a Century of Data

Afees Salisu, Rangan Gupta and Ahamuefula Ogbonna

No 201978, Working Papers from University of Pretoria, Department of Economics

Abstract: This study forecasts the monthly realized volatility of the US stock market covering the period of February, 1885 to September, 2019 using a recently developed novel approach – a moving average heterogeneous autoregressive (MAT-HAR) model, which treats threshold as a moving average generated time varying parameter rather than as a fixed or unknown parameter. The significance of asymmetric information in realized volatility of stock market forecasting is also considered by examining the case of good and bad realized volatility. The Clark and West (2007) forecast evaluation approach is employed to evaluate the forecast performance of the proposed predictive model vis-à-vis the conventional HAR and threshold HAR (T-HAR) models. We find evidence in favour of the MAT-HAR model relative to the HAR and T-HAR models. Also observed is the significant role of asymmetry in modeling the realized volatility as good realized volatility and bad realized volatility yield dissimilar predictability results. Our results are not sensitive to the choice of sample periods and realized volatility measures.

Keywords: Realized volatility; US stock market; Forecast evaluation; HAR models (search for similar items in EconPapers)
JEL-codes: C22 C53 G12 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2019-11
New Economics Papers: this item is included in nep-ets, nep-fmk, nep-for, nep-ore, nep-rmg and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: A moving average heterogeneous autoregressive model for forecasting the realized volatility of the US stock market: Evidence from over a century of data (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201978

Access Statistics for this paper

More papers in Working Papers from University of Pretoria, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Rangan Gupta ().