EconPapers    
Economics at your fingertips  
 

Modeling and forecasting return jumps using realized variation measures

Yi Liu, Huifang Liu and Lei Zhang

Economic Modelling, 2019, vol. 76, issue C, 63-80

Abstract: This paper proposes a simple HAR-RV-based model to predict return jumps through a conditional density of jump size with time-varying moments. We model jump occurrences based on a version of the autoregressive conditional hazard model that relies on past continuous realized volatilities. Applying our methodology to seven equity indices on the U.S. and Chinese stock markets, we reach the following key findings: (i) jump occurrence and size are dependent on past realized volatility, (ii) the proposed model yields superior in- and out-of-sample jump size density forecasts compared to an ARMA(1,1)-GARCH(1,1) model, (iii) and the occurrence and sign of return jumps are predictable to some extent.

Keywords: Realized variation; Jumps; Hazard rates; Probability forecast; Density forecast (search for similar items in EconPapers)
JEL-codes: C1 G1 C2 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S026499931731057X
Full text for ScienceDirect subscribers only

Related works:
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:eee:ecmode:v:76:y:2019:i:c:p:63-80

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-01-12
Handle: RePEc:eee:ecmode:v:76:y:2019:i:c:p:63-80