Forecasting Comparison of Long Term Component Dynamic Models for Realized Covariance Matrices

Luc Bauwens, Manuela Braione and Giuseppe Storti

Annals of Economics and Statistics, 2016, issue 123-124, 103-134

Abstract: Novel model specifications that include a time-varying long-run component in the dynamics of realized covariance matrices are proposed. The modelling framework allows the secular component to enter the model either additively or as a multiplicative factor, and to be specified parametrically, using a MIDAS filter, or non-parametrically. Estimation is performed by maximizing a Wishart quasi-likelihood function. The one-step ahead forecasting performance is assessed by means of three approaches: model confidence sets, minimum variance portfolios and Value-at-Risk. The results show that the proposed models outperform benchmarks incorporating a constant long-run component both in and out-of-sample.

Keywords: Realized Covariance; Component Dynamic Models; MIDAS; Minimum Variance Portfolio; Model Confidence Set; Value-at-Risk (search for similar items in EconPapers)
JEL-codes: C13 C32 C58 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Forecasting comparison of long term component dynamic models for realized covariance matrices (2016)
Working Paper: Forecasting comparison of long term component dynamic models for realized covariance matrices (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2016:i:123-124:p:103-134

DOI: 10.15609/annaeconstat2009.123-124.0103

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