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Breitung, Joerg and Hafner, Christian M. (2016). A simple model for now-casting volatility series. Int. J. Forecast., 32 (4). S. 1247 - 1256. AMSTERDAM: ELSEVIER SCIENCE BV. ISSN 1872-8200

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Abstract

The popular volatility models focus on the conditional variance given past observations, whereas the (arguably most important) information in the current observation is ignored. This paper proposes a simple model for now-casting volatilities based on a specific ARMA representation of the log-transformed squared returns that allows us to estimate the current volatility as a function of current and past returns. The model can be viewed as a stochastic volatility model with perfect correlation between the two error terms. It is shown that the volatility nowcasts are invariant to this correlation, and therefore the estimated volatilities coincide. We propose an extension of our nowcasting model that takes into account the so-called leverage effect. The alternative models are used to estimate daily return volatilities from the S&P 500 stock price index. (C) 2016 International Institute of Forecasters. Published by Elsevier B.V. All rights reserved.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Breitung, Joerg UNSPECIFIED UNSPECIFIED UNSPECIFIED Hafner, Christian M. UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-260904
DOI:	10.1016/j.ijforecast.2016.04.007
Journal or Publication Title:	Int. J. Forecast.
Volume:	32
Number:	4
Page Range:	S. 1247 - 1256
Date:	2016
Publisher:	ELSEVIER SCIENCE BV
Place of Publication:	AMSTERDAM
ISSN:	1872-8200
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language CONDITIONAL HETEROSKEDASTICITY; BUSINESS-CYCLE; ASSET RETURNS; TIME-SERIES; COMPONENTS; DECOMPOSITIONS Multiple languages Economics; Management Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/26090