Forecasting the realized volatility of the Chinese stock market: Do the G7 stock markets help?

Huan Peng, Ruoxun Chen, Dexiang Mei and Xiaohua Diao

Physica A: Statistical Mechanics and its Applications, 2018, vol. 501, issue C, 78-85

Abstract: In this paper, we use a comprehensive look to investigate whether the G7 stock markets can contain predictive information to help in forecasting the Chinese stock market volatility. Our out-of-sample empirical results indicate the kitchen sink (HAR-RV-SK) model is able to attain better performance than the benchmark model (HAR-RV) and other models, implying that the G7 stock markets can help in predicting the one-day volatility of the Chinese stock market. Moreover, the kitchen sink strategy can beat the strategy of the simple combination forecasts. Finally, the G7 stock markets can indeed contain useful information, which can increase the accuracy forecasts of the Chinese stock market.

Keywords: Volatility forecasting; HAR-RV; Realized volatility; Kitchen sink model (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:501:y:2018:i:c:p:78-85

DOI: 10.1016/j.physa.2018.02.093

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