A factor approach to realized volatility forecasting in the presence of finite jumps and cross-sectional correlation in pricing errors


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ATAK ATALIK A., Kapetanios G.

ECONOMICS LETTERS, vol.120, no.2, pp.224-228, 2013 (Peer-Reviewed Journal) identifier identifier

  • Publication Type: Article / Article
  • Volume: 120 Issue: 2
  • Publication Date: 2013
  • Doi Number: 10.1016/j.econlet.2013.03.051
  • Journal Name: ECONOMICS LETTERS
  • Journal Indexes: Social Sciences Citation Index, Scopus
  • Page Numbers: pp.224-228
  • Keywords: Realized volatility, Bipower variation, Jump tests, Factor models, Volatility forecasting, Model selection, NUMBER

Abstract

There is a growing literature on the realized volatility (RV) forecasting of asset returns using high-frequency data. We explore the possibility of forecasting RV with factor analysis; once considering the significant jumps. A real high-frequency financial data application suggests that the factor based approach is of significant potential interest and novelty. (C) 2013 Elsevier B.V. All rights reserved.