Realized Beta GARCH: A Multivariate GARCH model with realized measures of volatility and covolatility
Title: Realized Beta GARCH: A Multivariate GARCH model with realized measures of volatility and covolatility
Series/Number: EUI ECO; 2012/28
We introduce a multivariate GARCH model that incorporates realized measures of volatility and covolatility. The realized measures extract information about the current level of volatility and covolatility from high-frequency data, which is particularly useful for the modeling of return volatility during periods with rapid changes in volatility and covolatility. When applied to market returns in conjunction with returns on an individual asset, the model yields a dynamic model of the conditional regression coefficient that is known as the beta. We apply the model to a large set of assets and find the conditional betas to be far more variable than is usually found with rolling-window regressions based exclusively on daily returns. In the empirical part of the paper we examine the cross-sectional as well as the time variation of the conditional beta series during the financial crises.
Subject: Financial Volatility; Beta; Realized GARCH; High Frequency Data; G11; G17; C58
Type of Access: openAccess
Published version: http://hdl.handle.net/1814/33683