Do Jumps Matter? Forecasting Multivariate Realized Volatility allowing for Common Jumps
Yin Liao (),
Heather Anderson and
Farshid Vahid ()
No 11/10, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics
Realized volatility of stock returns is often decomposed into two distinct components that are attributed to continuous price variation and jumps. This paper proposes a tobit multivariate factor model for the jumps coupled with a standard multivariate factor model for the continuous sample path to jointly forecast volatility in three Chinese Mainland stocks. Out of sample forecast analysis shows that separate multivariate factor models for the two volatility processes outperform a single multivariate factor model of realized volatility, and that a single multivariate factor model of realized volatility outperforms univariate models.
Keywords: Realized Volatility; Bipower Variation; Jumps; Common Factors; Forecasting (search for similar items in EconPapers)
JEL-codes: C13 C32 C52 C53 G17 G32 (search for similar items in EconPapers)
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Working Paper: Do Jumps Matter? Forecasting Multivariate Realized Volatility Allowing for Common Jumps (2010)
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