Correcting the Errors: A Note on Volatility Forecast Evaluation Based on High-Frequency Data and Realized Volatilities

Torben Andersen, Tim Bollerslev and Nour Meddahi

Cahiers de recherche from Universite de Montreal, Departement de sciences economiques

Abstract: This note develops general model-free adjustment procedures for the calculation of unbiased volatility loss functions based on practically feasible realized volatility benchmarks. The procedures, which exploit the recent asymptotic distributional results in Barndorff-Nielsen and Shephard (2002a), are both easy to implement and highly accurate in empirically realistic situations. On properly accounting for the measurement errors in the volatility forecast evaluations reported in Andersen, Bollerslev, Diebold and Labys (2003), the adjustments result in markedly higher estimates for the true degree of return-volatility predictability.

Keywords: measurement errors; model-free adjustment ocedures; integrated volatility; realized volatility; high-frequency data; time series forecasting; Mincer-Zarnowitz regressions (search for similar items in EconPapers)
Pages: 12 pages
Date: 2002
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-rmg
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Citations: View citations in EconPapers (15)

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http://hdl.handle.net/1866/496 (application/pdf)

Related works:
Working Paper: Correcting the Errors: A Note on Volatility Forecast Evaluation Based on High-Frequency Data and Realized Volatilities (2002)
Working Paper: CORRECTING THE ERRORS: A NOTE ON VOLATILITY FORECAST EVALUATION BASED ON HIGH-FREQUENCY DATA AND REALIZED VOLATILITIES (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:mtl:montde:2002-21

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