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Bekierman, Jeremias and Manner, Hans (2018). Forecasting realized variance measures using time-varying coefficient models. Int. J. Forecast., 34 (2). S. 276 - 288. AMSTERDAM: ELSEVIER SCIENCE BV. ISSN 1872-8200

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Abstract

This paper considers the problem of forecasting realized variance measures. These measures are highly persistent estimates of the underlying integrated variance, but are also noisy. Bollerslev, Patton and Quaedvlieg (2016), Journal of Econometrics 192(1), 1-18 exploited this so as to extend the commonly used heterogeneous autoregressive (HAR) by letting the model parameters vary over time depending on the estimated measurement error variances. We propose an alternative specification that allows the autoregressive parameters of HAR models to be driven by a latent Gaussian autoregressive process that may also depend on the estimated measurement error variance. The model parameters are estimated by maximum likelihood using the Kalman filter. Our empirical analysis considers the realized variances of 40 stocks from the S&P 500. Our model based on log variances shows the best overall performance and generates superior forecasts both in terms of a range of different loss functions and for various subsamples of the forecasting period. (C) 2018 International Institute of Forecasters. Published by Elsevier B.V. All rights reserved.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Bekierman, Jeremias UNSPECIFIED UNSPECIFIED UNSPECIFIED Manner, Hans UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-191133
DOI:	10.1016/j.ijforecast.2017.12.005
Journal or Publication Title:	Int. J. Forecast.
Volume:	34
Number:	2
Page Range:	S. 276 - 288
Date:	2018
Publisher:	ELSEVIER SCIENCE BV
Place of Publication:	AMSTERDAM
ISSN:	1872-8200
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language VOLATILITY; KERNELS Multiple languages Economics; Management Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/19113