Forecasting volatility via stock return, range, trading volume and spillover effects: The case of Brazil

Manabu Asai and Ivan Brugal

The North American Journal of Economics and Finance, 2013, vol. 25, issue C, 202-213

Abstract: For the purpose of developing alternative approach for forecasting volatility, we consider heterogeneous VAR (HVAR) model which accommodates the market effects of different horizons, namely, daily, weekly and monthly effects, and examine the interdependence of stock markets in Brazil and the US, based on information of daily return, range and trading volume. To compare with the new approach, we also work with the univariate and multivariate GARCH models with asymmetric effects, trading volumes and fat-tails. The heteroskedasticity-corrected Granger causality tests based on the HVAR show the strong evidence of such spillover effects. We assess the value-at-risk thresholds for Brazil, based on the out-of-sample forecasts of the HVAR model, finding the new approach works satisfactory for the periods including the global financial crisis, without assuming heavy-tailed conditional distributions.

Keywords: Vector autoregression; Heterogeneous autoregressive models; Range; Volatility; Trading volume; Value at risk; Leverage effects (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:25:y:2013:i:c:p:202-213

DOI: 10.1016/j.najef.2012.06.005

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