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Modeling Tick-by-Tick Realized Correlations

Fulvio Corsi () and Francesco Audrino ()

University of St. Gallen Department of Economics working paper series 2008 from Department of Economics, University of St. Gallen

Abstract: We propose a tree-structured heterogeneous autoregressive (tree-HAR) process as a simple and parsimonious model for the estimation and prediction of tick-by-tick realized correlations. The model can account for different time and other relevant predictors' dependent regime shifts in the conditional mean dynamics of the realized correlation series. Testing the model on S&P 500 and 30-year treasury bond futures realized correlations, we provide empirical evidence that the tree-HAR model reaches a good compromise between simplicity and flexibility, and yields accurate single- and multi-step out-of-sample forecasts. Such forecasts are also better then those obtained from other standard approaches.

Keywords: High frequency data; Realized correlation; Stock-bond correlation; Tree-structured models; HAR; Regimes (search for similar items in EconPapers)
JEL-codes: C13 C22 C51 C53 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2008-01
New Economics Papers: this item is included in nep-ecm, nep-for and nep-mst
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Journal Article: Modeling tick-by-tick realized correlations (2010) Downloads
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