EconPapers    
Economics at your fingertips  
 

Improving (E)GARCH forecasts with robust realized range measures: Evidence from international markets

Beatriz Vaz de Melo Mendes (beatriz@im.ufrj.br) and Victor Bello Accioly
Additional contact information
Beatriz Vaz de Melo Mendes: Federal University at Rio de Janeiro
Victor Bello Accioly: Federal University at Rio de Janeiro

Journal of Economics and Finance, 2017, vol. 41, issue 4, No 1, 658 pages

Abstract: Abstract This paper empirically shows that (E)GARCH volatility forecasts may be improved by inserting an appropriate exogenous variable in the volatility equation. Several realized measures were tested as regressors and the robust to microstructure effects and/or jumps realized range-based measures provided the best results. The out-of-sample forecasts were computed in two steps. Firstly, the (E)GARCH-X model was estimated. Secondly, an ARFIMA forecast of the realized range was plugged into the volatility prediction formula. The methodology was illustrated in a comprehensive study involving fifteen market indices from developed stock markets. It was also shown that the inclusion of realized range-based measures as regressors reduces persistence and renders the past squared returns with no remaining explanatory power. We use two evaluation criteria to compare the forecasting performance of the (E)GARCH-X model and the Realized GARCH model.

Keywords: (E)GARCH-X and realized GARCH models; Realized range; ARFIMA model; Two-step GARCH-X forecasts (search for similar items in EconPapers)
JEL-codes: C31 C53 G15 G17 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s12197-017-9386-x Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
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:spr:jecfin:v:41:y:2017:i:4:d:10.1007_s12197-017-9386-x

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/12197/PS2

DOI: 10.1007/s12197-017-9386-x

Access Statistics for this article

Journal of Economics and Finance is currently edited by James Payne

More articles in Journal of Economics and Finance from Springer, Academy of Economics and Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla (sonal.shukla@springer.com) and Springer Nature Abstracting and Indexing (indexing@springernature.com).

 
Page updated 2024-12-29
Handle: RePEc:spr:jecfin:v:41:y:2017:i:4:d:10.1007_s12197-017-9386-x