Volatility forecasting in European government bond markets

Ali Gencay Ozbekler, Alexandros Kontonikas and Athanasios Triantafyllou

International Journal of Forecasting, 2021, vol. 37, issue 4, 1691-1709

Abstract: In this paper we examine the predictive power of the heterogeneous autoregressive (HAR) model for the return volatility of major European government bond markets. The results from HAR-type volatility forecasting models show that past short- and medium-term volatility are significant predictors of the term structure of the intraday volatility of European bonds with maturities ranging from 1 year up to 30 years. When we decompose bond market volatility into its continuous and discontinuous (jump) component, we find that the jump component is a significant predictor. Moreover, we show that feedback from past short-term volatility to forecasts of future volatility is stronger in the days that precede monetary policy announcements.

Keywords: Bonds; Realized volatility; Volatility forecasting; Jumps; Monetary policy announcements (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Working Paper: Volatility Forecasting in European Government Bond Markets (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:37:y:2021:i:4:p:1691-1709

DOI: 10.1016/j.ijforecast.2021.03.009

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