Asymmetry and Long Memory in Volatility Modelling
Manabu Asai,
Michael McAleer and
Marcelo Medeiros ()
No 2011-29, Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico
Abstract:
A wide variety of conditional and stochastic variance models has been used to estimate latent volatility (or risk). In this paper, we propose a new long memory asymmetric volatility model which captures more flexible asymmetric patterns as compared with several existing models. We extend the new specification to realized volatility by taking account of measurement errors, and use the Efficient Importance Sampling technique to estimate the model. As an empirical example, we apply the new model to the realized volatility of S&P500 to show that the new specification of asymmetry significantly improves the goodness of fit, and that the out-of-sample forecasts and Value-at-Risk (VaR) thresholds are satisfactory. Overall, the results of the out-of-sample forecasts show the adequacy of the new asymmetric and long memory volatility model for the period including the global financial crisis.
Keywords: Asymmetric volatility; Long memory; Realized volatility; Measurement errors; Efficient importance sampling. (search for similar items in EconPapers)
Pages: 29 pages
Date: 2011
Note: The authors are most grateful to a Co-Editor, Associate Editor and two referees for very helpful comments and suggestions, and Marcel Scharth for efficient research assistance. For financial support, the first author acknowledges the Japan Ministry of Education, Culture, Sports, Science and Technology, Japan Society for the Promotion of Science, and Australian Academy of Science, the second author is most grateful to the Australian Research Council, National Science Council, Taiwan, and Japan Society for the Promotion of Science, and the third author wishes to acknowledge CNPq, Brazil.
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://eprints.ucm.es/id/eprint/13215/1/1129.pdf revised augost 2011 (application/pdf)
Related works:
Journal Article: Asymmetry and Long Memory in Volatility Modeling (2012) 
Working Paper: Asymmetry and Long Memory in Volatility Modelling (2010) 
Working Paper: Asymmetry and Long Memory in Volatility Modelling (2010) 
Working Paper: Asymmetry and Long Memory in Volatility Modelling (2010) 
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:ucm:doicae:1129
Ordering information: This working paper can be ordered from
Facultad de Ciencias Económicas y Empresariales. Pabellón prefabricado, 1ª Planta, ala norte. Campus de Somosaguas, 28223 - POZUELO DE ALARCÓN (MADRID)
https://www.ucm.es/f ... -de-trabajo-del-icae
Access Statistics for this paper
More papers in Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico Contact information at EDIRC.
Bibliographic data for series maintained by Águeda González Abad ().