Realized Stochastic Volatility with General Asymmetry and Long Memory

Manabu Asai, Chia-Lin Chang () and Michael McAleer

No 17-038/III, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: The paper develops a novel realized stochastic volatility model of asset returns and realized volatility that incorporates general asymmetry and long memory (hereafter the RSV-GALM model). The contribution of the paper ties in with Robert Basmann’s seminal work in terms of the estimation of highly non-linear model specifications (“Causality tests and observationally equivalent representations of econometric models”, Journal of Econometrics, 1988), especially for specifying causal effects from returns to future volatility. This paper discusses asymptotic results of a Whittle likelihood estimator for the RSV-GALM model and a test for general asymmetry, and analyses the finite sample properties. The paper also develops an approach to obtain volatility estimates and out-of-sample forecasts. Using high frequency data for three US financial assets, the new model is estimated and evaluated. The paper compares the forecasting performance of the new model with a realized conditional volatility model.

Keywords: Stochastic Volatility; Realized Measure; Long Memory; Asymmetry; Whittle likelihood (search for similar items in EconPapers)
JEL-codes: C13 C22 (search for similar items in EconPapers)
Date: 2017-04-10
New Economics Papers: this item is included in nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Related works:
Journal Article: Realized stochastic volatility with general asymmetry and long memory (2017)
Working Paper: Realized Stochastic Volatility with General Asymmetry and Long Memory (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20170038

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