Realized Volatility Forecasting: Robustness to Measurement Errors
Fabrizio Cipollini (),
Giampiero M. Gallo () and
Edoardo Otranto ()
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Fabrizio Cipollini: Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti", UniversitÃ di Firenze, http://www.disia.unifi.it
Giampiero M. Gallo: Corte dei Conti and NYU in Florence, Italy
Edoardo Otranto: UniversitÃ di Messina, Italy
No 2019_04, Econometrics Working Papers Archive from Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti"
In this paper, we reconsider the issue of measurement errors affecting the estimates of a dynamic model for the conditional expectation of realized variance arguing that heteroskedasticity of such errors may be adequately represented with a multiplicative error model. Empirically we show that the significance of quarticity/quadratic terms capturing attenuation bias is very important within an HAR model, but is greatly diminished within an AMEM, and more so when regime specific dynamics account for a faster mean reversion when volatility is high. Model Confidence Sets confirm such robustness both inâ€“ and outâ€“ofâ€“sample.
Keywords: Realized volatility; Forecasting; Measurement errors; HAR; AMEM; Markov switching; Volatility of volatility (search for similar items in EconPapers)
JEL-codes: C22 C51 C53 C58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-ore and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:fir:econom:wp2019_04
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