Forecasting volatility of the Chinese stock markets using TVP HAR-type models

Guangqiang Liu, Yan Wang, Xiaodan Chen, Yifeng Zhang and Yue Shang

Physica A: Statistical Mechanics and its Applications, 2020, vol. 542, issue C

Abstract: In this paper, we use a novel Heterogeneous Autoregressive Model (HAR) with time-varying parameters (TVP) to forecast China’s stock market volatility. Many traditional constant coefficient (CC) HAR-type models, incorporating signed variance, jump and volatility leverage effect, are extended to be TVP models. The empirical results show that the extended TVP HAR-type models can beat those CC HAR-type ones in both in-sample estimation and out-of-sample prediction perspective. Moreover, the TVP HAR model that can describe continuous volatility component, signed jump and leverage effect is superior to other CC or TVP HAR-type models in forecasting the volatilities of China’s stock market.

Keywords: Realized volatility; HAR model; HARQ; H-CSJQ; Chinese stock market (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:542:y:2020:i:c:s0378437119319247

DOI: 10.1016/j.physa.2019.123445

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