The Impact of Jumps and Leverage in Forecasting Co-Volatility

Manabu Asai and Michael McAleer

No EI 2015-06, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: __Abstract__ The paper investigates the impact of jumps in forecasting co-volatility, accommodating leverage effects. We modify the jump-robust two time scale covariance estimator of Boudt and Zhang (2013) such that the estimated matrix is positive definite. Using this approach we can disentangle the estimates of the integrated co-volatility matrix and jump variations from the quadratic covariation matrix. Empirical results for three stocks traded on the New York Stock Exchange indicate that the co-jumps of two assets have a significant impact on future co-volatility, but that the impact is negligible for forecasting weekly and monthly horizons.

Keywords: Co-Volatility; Forecasting; Jump; Leverage Effects; Realized Covariance; Threshold; Estimation. (search for similar items in EconPapers)
JEL-codes: C32 C53 C58 G17 (search for similar items in EconPapers)
Pages: 22
Date: 2015-02-01
New Economics Papers: this item is included in nep-for and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://repub.eur.nl/pub/78068/EI2015-06.pdf (application/pdf)

Related works:
Journal Article: The impact of jumps and leverage in forecasting covolatility (2017)
Working Paper: The Impact of Jumps and Leverage in Forecasting Co-Volatility (2015)
Working Paper: The Impact of Jumps and Leverage in Forecasting Co-Volatility (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ems:eureir:78068

Access Statistics for this paper

More papers in Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute Contact information at EDIRC.
Bibliographic data for series maintained by RePub ( this e-mail address is bad, please contact ).