EconPapers    
Economics at your fingertips  
 

Realized Volatility Risk

David Allen, Michael McAleer and Marcel Scharth
Additional contact information
Marcel Scharth: VU University Amsterdam and Tinbergen Institute

No CIRJE-F-693, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: In this paper we document that realized variation measures constructed from high-frequency returns reveal a large degree of volatility risk in stock and index returns, where we characterize volatility risk by the extent to which forecasting errors in realized volatility are substantive. Even though returns standardized by ex post quadratic variation measures are nearly gaussian, this unpredictability brings considerably more uncertainty to the empirically relevant ex ante distribution of returns. Carefully modeling this volatility risk is fundamental. We propose a dually asymmetric realized volatility (DARV) model, which incorporates the important fact that realized volatility series are systematically more volatile in high volatility periods. Returns in this framework display time varying volatility, skewness and kurtosis. We provide a detailed account of the empirical advantages of the model using data on the S&P 500 index and eight other indexes and stocks.

Pages: 39pages
Date: 2009-12
New Economics Papers: this item is included in nep-ban, nep-bec, nep-ecm, nep-fmk, nep-mst and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.cirje.e.u-tokyo.ac.jp/research/dp/2009/2009cf693.pdf (application/pdf)

Related works:
Working Paper: Realized Volatility Risk (2013) Downloads
Working Paper: Realized volatility risk (2013) Downloads
Working Paper: Realized Volatility Risk (2010) Downloads
Working Paper: Realized Volatility Risk (2010) Downloads
Working Paper: REALIZED VOLATILITY RISK (2010) Downloads
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:tky:fseres:2009cf693

Access Statistics for this paper

More papers in CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo Contact information at EDIRC.
Bibliographic data for series maintained by CIRJE administrative office ().

 
Page updated 2025-03-24
Handle: RePEc:tky:fseres:2009cf693