Forecasting VaR using realized EGARCH model with skewness and kurtosis

Xinyu Wu, Michelle Xia and Huanming Zhang

Finance Research Letters, 2020, vol. 32, issue C

Abstract: This paper proposes an extension of the realized EGARCH (RealEGARCH) model, namely the RealEGARCH model with Skewness and Kurtosis (RealEGARCH-SK model) for forecasting VaR. The model is able to account for time-varying non-Gaussianities (time-varying skewness and kurtosis). The empirical analysis using the Chinese stock indices, the Shanghai Stock Exchange Composite (SSEC) and the Shenzhen Stock Exchange Component (SZSEC), demonstrates that the RealEGARCH-SK model produces more accurate extreme VaR forecasts than the standard realized GARCH (RealGARCH) and RealEGARCH models with the normal distribution and the RealEGARCH model with the skewed t-distribution (RealEGARCH-ST model).

Keywords: Non-Gaussianities; VaR; Realized measure; Leverage effect; RealEGARCH-SK (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:32:y:2020:i:c:s1544612318308067

DOI: 10.1016/j.frl.2019.01.002

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