Exponential GARCH Modeling with Realized Measures of Volatility
Title: Exponential GARCH Modeling with Realized Measures of Volatility
Series/Number: EUI ECO; 2012/26
We introduce the Realized Exponential GARCH model that can utilize multiple realized volatility measures for the modeling of a return series. The model specifies the dynamic properties of both returns and realized measures, and is characterized by a flexible modeling of the dependence between returns and volatility. We apply the model to DJIA stocks and an exchange traded fund that tracks the S&P 500 index and find that specifications with multiple realized measures dominate those that rely on a single realized measure. The empirical analysis suggests some convenient simplifications and highlights the advantages of the new specification.
Subject: EGARCH; High Frequency Data; Realized Variance; Leverage Effect; C10; C22; C80
Type of Access: openAccess