High Frequency vs. Daily Resolution: the Economic Value of Forecasting Volatility Models

Arbeitspapier

Forecasting-volatility models typically rely on either daily or high frequency (HF) data and the choice between these two categories is not obvious. In particular, the latter allows to treat volatility as observable but they suffer of many limitations. HF data feature microstructure problem, such as the discreteness of the data, the properties of the trading mechanism and the existence of bid-ask spread. Moreover, these data are not always available and, even if they are, the asset's liquidity may be not sufficient to allow for frequent transactions. This paper considers different variants of these two family forecasting-volatility models, comparing their performance (in terms of Value at Risk, VaR) under the assumptions of jumping prices and leverage effects for volatility. Findings suggest that GARJI model provides more accurate VaR measures for the S&P 500 index than RV models. Furthermore, the assumption of conditional normality is shown to be not sufficient to obtain accurate risk measures even if jump contribution is provided. More sophisticated models might address this issue, improving VaR results.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Quaderni - Working Paper DSE ; No. 1084

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Financial Econometrics ; Forecasting Models; Simulation Methods ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Econometrics ; Estimation: General

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Lilla, Francesca
• Ereignis: Veröffentlichung
• (wer): Alma Mater Studiorum - Università di Bologna, Dipartimento di Scienze Economiche (DSE)
• (wo): Bologna
• (wann): 2016

Weitere Informationen

• DOI: doi:10.6092/unibo/amsacta/5444
• Handle: http://hdl.handle.net/10419/159922
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ