EconPapers    
Economics at your fingertips  
 

Local Adaptive Multiplicative Error Models for High-Frequency Forecasts

Wolfgang Karl Härdle, Nikolaus Hautsch () and Andrija Mihoci ()
Authors registered in the RePEc Author Service: Wolfgang Karl Härdle ()

No SFB649DP2012-031, SFB 649 Discussion Papers from Humboldt University, Collaborative Research Center 649

Abstract: We propose a local adaptive multiplicative error model (MEM) accommodating timevarying parameters. MEM parameters are adaptively estimated based on a sequential testing procedure. A data-driven optimal length of local windows is selected, yielding adaptive forecasts at each point in time. Analyzing one-minute cumulative trading volumes of five large NASDAQ stocks in 2008, we show that local windows of approximately 3 to 4 hours are reasonable to capture parameter variations while balancing modelling bias and estimation (in)efficiency. In forecasting, the proposed adaptive approach significantly outperforms a MEM where local estimation windows are fixed on an ad hoc basis.

Keywords: multiplicative error model; local adaptive modelling; high-frequency processes; trading volume; forecasting (search for similar items in EconPapers)
JEL-codes: C41 C51 C53 G12 G17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-for and nep-mst
Date: 2012-04
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (6) Track citations by RSS feed

Downloads: (external link)
http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2012-031.pdf (application/pdf)

Related works:
Journal Article: Local Adaptive Multiplicative Error Models for High‐Frequency Forecasts (2015) Downloads
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:hum:wpaper:sfb649dp2012-031

Access Statistics for this paper

More papers in SFB 649 Discussion Papers from Humboldt University, Collaborative Research Center 649 Contact information at EDIRC.
Series data maintained by RDC-Team ().

 
Page updated 2018-01-23
Handle: RePEc:hum:wpaper:sfb649dp2012-031