S&P500 volatility analysis using high-frequency multipower variation volatility proxies
Wen Cheong Chin and
Min Cherng Lee ()
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Wen Cheong Chin: Multimedia University
Min Cherng Lee: Monash University
Empirical Economics, 2018, vol. 54, issue 3, 1297-1318
Abstract The availability of ultra-high-frequency data has sparked enormous parametric and nonparametric volatility estimators in financial time series analysis. However, some high-frequency volatility estimators are suffering from biasness issues due to the abrupt jumps and microstructure effect that often observed in nowadays global financial markets. Hence, we motivate our studies with two long-memory time series models using various high-frequency multipower variation volatility proxies. The forecast evaluations are illustrated using the S&P500 data over the period from year 2008 to 2013. Our empirical studies found that higher-power variation volatility proxies provide better in-sample and out-of-sample performances as compared to the widely used realized volatility and fractionally integrated ARCH models. Finally, these empirical findings are used to estimate the one-day-ahead value-at-risk of S&P500.
Keywords: Efficient market hypothesis; Realized volatility; Multipower variation volatility (search for similar items in EconPapers)
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