Forecasting the realized volatility: the role of jumps

Zhichao Liu, Feng Ma, Xunxiao Wang and Zean Xia

Applied Economics Letters, 2016, vol. 23, issue 10, 736-739

Abstract: This article investigates the role of jump components dependent on the ABD-LM jump test in forecasting volatility. Our out-of-sample forecasting results show that compared with the ABD-LM jump component, its decomposition forms based on signed returns can significantly improve the models’ forecasting performance and our findings have important implications for investors and policymakers.

Date: 2016
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DOI: 10.1080/13504851.2015.1105911

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