Forecasting Multivariate Volatility Using the VARFIMA Model on Realized Covariance Cholesky Factors
Roxana Halbleib () and
Valeri Voev ()
No ECARES 2010-041, Working Papers ECARES from ULB -- Universite Libre de Bruxelles
This paper analyzes the forecast accuracy of the multivariate realized volatility model introduced by Chiriac and Voev (2010), subject to different degrees of model parametrization and economic evaluation criteria. By modelling the Cholesky factors of the covariance matrices, the model generates positive definite, but biased covariance forecasts. In this paper, we provide empirical evidence that parsimonious versions of the model generate the best covariance forecasts in the absence of bias correction. Moreover, we show by means of stochastic dominance tests that any risk averse investor, regardless of the type of utility function or return distribution, would be better-off from using this model than from using some standard approaches.
Keywords: Forecasting; Fractional integration; Stochastic dominance; Portfolio optimization; Realized covariance (search for similar items in EconPapers)
JEL-codes: C32 C53 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-for and nep-ore
References: View complete reference list from CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
https://dipot.ulb.ac.be/dspace/bitstream/2013/7358 ... VOEV-forecasting.pdf 2010-041-HALBLEIB_VOEV-forecasting (application/pdf)
Journal Article: Forecasting Multivariate Volatility using the VARFIMA Model on Realized Covariance Cholesky Factors* (2011)
Working Paper: Forecasting multivariate volatility using the VARFIMA model on realized covariance cholesky factors (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:eca:wpaper:2013/73585
Ordering information: This working paper can be ordered from
http://hdl.handle.ne ... ulb.ac.be:2013/73585
Access Statistics for this paper
More papers in Working Papers ECARES from ULB -- Universite Libre de Bruxelles Contact information at EDIRC.
Series data maintained by Benoit Pauwels ().