 Do realized higher moments have information content? - VaR forecasting based on the realized GARCH-RSRK modelTianyi Wang (), Fang Liang, Zhuo Huang and Hong Yan Economic Modelling, 2022, vol. 109, issue C Abstract: In this paper, we develop a new model, the Realized GARCH-RSRK, to determine the time-varying distribution of financial returns with realized higher moments. Based on Gram-Charlier expansion (GCE) density, we first explicitly link the expansion parameters with moments that are calculated based on intraday returns using our new model. Then, the Cornish-Fisher expansion is applied to forecast Value-at-Risk (VaR) with estimated moments to demonstrate the economic significance of this new model. Compared with the daily-return-based dynamic higher moments models, the inclusion of realized higher moments significantly improves this model's ability to forecast extreme tails. The empirical results indicate that this new model outperforms the benchmark models when forecasting extreme VaR. In addition, we provide a formula to correct the moments associated with the commonly used squared transformation of GCE. Our empirical evidence highlights the importance of using corrected moments in VaR forecasting. Keywords: Realized GARCH-RSRK; Realized higher moments; Realized GARCH; Gram-Charlier expansion; Value-at-Risk (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:109:y:2022:i:c:s026499932200027x DOI: 10.1016/j.econmod.2022.105781 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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