Realized Beta GARCH: A Multivariate GARCH Model with Realized Measures of Volatility and CoVolatility

Peter Hansen, Asger Lunde () and Valeri Voev ()

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: We introduce a multivariate GARCH model that utilizes and models realized measures of volatility and covolatility. The realized measures extract information contained in high-frequency data that is particularly beneficial during periods with variation in volatility and covolatility. Applying the model to market returns in conjunction with an individual asset yields a model for the conditional regression coefficient, known as the beta. We apply the model to a set of highly liquid stocks and find that conditional betas are much more variable than usually observed with rolling-window OLS regressions with dailty data. In the empirical part of the paper we examine the cross-sectional as well as the time variation of the conditional beta series. The model links the conditional and realized second moment measures in a self-contained system of equations, making it amenable to extensions and easy to estimate. A multi-factor extension of the model is briefly discussed.

Keywords: Financial Volatility; Beta; Realized GARCH; High Frequency Data. (search for similar items in EconPapers)
JEL-codes: C58 G11 G17 (search for similar items in EconPapers)
Pages: 19
Date: 2010-11-29
New Economics Papers: this item is included in nep-ets and nep-fmk
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Citations: View citations in EconPapers (16)

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https://repec.econ.au.dk/repec/creates/rp/10/rp10_74.pdf (application/pdf)

Related works:
Working Paper: Realized Beta GARCH: Multivariate GARCH Model with Realized Measures of Volatility and CoVolatility (2012)
Working Paper: Realized Beta GARCH: A Multivariate GARCH Model with Realized Measures of Volatility and Covolatility (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2010-74

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