Overnight information flow and realized volatility forecasting

Neda Todorova and Michael Soucek

Finance Research Letters, 2014, vol. 11, issue 4, 420-428

Abstract: This study compares various approaches for incorporating the overnight information flow for forecasting realized volatility of the Australian index ASX 200 and seven very liquid Australian shares from March 2007 to January 2014. The analysis shows that considering overnight information separately rather than adding it to the daily realized volatility estimates leads consistently to better out-of-sample results despite the higher number of involved parameters. A novel, very promising approach is to combine the assets’ own overnight returns with realized volatility estimates of related assets from other markets for which intraday data is available while the Australian exchange is closed.

Keywords: Forecasting of realized volatility; Overnight information flow; Australian equity market (search for similar items in EconPapers)
JEL-codes: C5 C53 G1 G15 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:11:y:2014:i:4:p:420-428

DOI: 10.1016/j.frl.2014.07.001

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