Leverage effect, economic policy uncertainty and realized volatility with regime switching

Yinying Duan, Wang Chen, Qing Zeng and Zhicao Liu

Physica A: Statistical Mechanics and its Applications, 2018, vol. 493, issue C, 148-154

Abstract: In this study, we first investigate the impacts of leverage effect and economic policy uncertainty (EPU) on future volatility in the framework of regime switching. Out-of-sample results show that the HAR-RV including the leverage effect and economic policy uncertainty with regimes can achieve higher forecast accuracy than RV-type and GARCH-class models. Our robustness results further imply that these factors in the framework of regime switching can substantially improve the HAR-RV’s forecast performance.

Keywords: Volatility forecasting; Realized volatility; Leverage effect; Economic policy uncertainty; Regime switching (search for similar items in EconPapers)
JEL-codes: C22 C52 C53 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:493:y:2018:i:c:p:148-154

DOI: 10.1016/j.physa.2017.10.040

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