Intra-daily information of range-based volatility for MEM-GARCH

K.P. Lam and H.S. Ng

Mathematics and Computers in Simulation (MATCOM), 2009, vol. 79, issue 8, 2625-2632

Abstract: Conventional GARCH modeling formulates an additive-error mean equation for daily return and an autoregressive moving-average specification for its conditional variance, without much consideration on the effects of intra-daily data. Using Engle’s multiplicative-error model (MEM) formulation, range-based volatility is proposed as an intraday proxy for several GARCH frameworks. The performances of these different approaches for two 8-year market data sets: the S&P 500 and the NASDAQ composite index, are studied and compared. The impact of significant changes in intraday data has been found to reflect in the MEM-GARCH volatility. For some frameworks it is also possible to use lagged values of range-based volatility to delay the intraday effects in the conditional variance estimation.

Keywords: Volatility forecasting; Multiplicative error model; GARCH (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:matcom:v:79:y:2009:i:8:p:2625-2632

DOI: 10.1016/j.matcom.2008.12.007

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