Quantile range-based volatility measure for modelling and forecasting volatility using high frequency data
Kok Haur Ng,
Jennifer So-Kuen Chan and
The North American Journal of Economics and Finance, 2019, vol. 47, issue C, 537-551
Volatility of asset prices in financial market is not directly observable. Return-based models have been proposed to estimate the volatility using daily closing prices. Recently, many new range-based volatility measures were proposed to estimate the financial volatility. This paper proposes quantile Parkinson (QPK) measure to estimate daily volatility and to show how it can robustify the Parkinson (PK) measure in the presence of intraday extreme returns. Results from extensive simulation studies show that the QPK measure is more efficient than intraday (open-to-close) squared returns and PK measures in the presence of intraday extreme returns. To demonstrate the applicability of QPK measure, we analyse the daily Standard and Poor 500 index by fitting the QPK measure to the conditional autoregressive range (CARR) models. Results show that choosing a suitable interquantile level width for the QPK measure will reduce its variance and hence improve its efficiency. In addition, the QPK measure using asymmetric CARR model gives the best in-sample model fit based on Akaike information criterion and provides the best out-of-sample forecast based on root mean squared forecast error and other measures. Mincer Zarnowitz test is carried out to confirm the unbiasedness of the forecasted volatility. Different levels of value-at-risk and conditional value-at-risk forecasts are also provided and tested.
Keywords: Volatility; Quantile Parkinson; Range-based model; Value-at-risk; High frequency (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:47:y:2019:i:c:p:537-551
Access Statistics for this article
The North American Journal of Economics and Finance is currently edited by Hamid Beladi
More articles in The North American Journal of Economics and Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().