Forecasting the value-at-risk of Chinese stock market using the HARQ model and extreme value theory

Guangqiang Liu, Yu Wei, Yongfei Chen, Jiang Yu and Yang Hu

Physica A: Statistical Mechanics and its Applications, 2018, vol. 499, issue C, 288-297

Abstract: Using intraday data of the CSI300 index, this paper discusses value-at-risk (VaR) forecasting of the Chinese stock market from the perspective of high-frequency volatility models. First, we measure the realized volatility (RV) with 5-minute high-frequency returns of the CSI300 index and then model it with the newly introduced heterogeneous autoregressive quarticity (HARQ) model, which can handle the time-varying coefficients of the HAR model. Second, we forecast the out-of-sample VaR of the CSI300 index by combining the HARQ model and extreme value theory (EVT). Finally, using several popular backtesting methods, we compare the VaR forecasting accuracy of HARQ model with other traditional HAR-type models, such as HAR, HAR-J, CHAR, and SHAR. The empirical results show that the novel HARQ model can beat other HAR-type models in forecasting the VaR of the Chinese stock market at various risk levels.

Keywords: Realized volatility; HARQ; Extreme value theory; VaR (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:499:y:2018:i:c:p:288-297

DOI: 10.1016/j.physa.2018.02.033

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