Date: 2012
Type: Article
Realized GARCH: A joint model for returns and realized measures of volatility
Journal of Applied Econometrics, 2012, 27, 6, 877-906
HANSEN, Peter Reinhard, HUANG, Zhuo, SHEK, Howard Howan, Realized GARCH: A joint model for returns and realized measures of volatility, Journal of Applied Econometrics, 2012, 27, 6, 877-906
- https://hdl.handle.net/1814/26007
Retrieved from Cadmus, EUI Research Repository
We introduce a new framework, Realized GARCH, for the joint modeling of returns and realized measures of volatility. A key feature is a measurement equation that relates the realized measure to the conditional variance of returns. The measurement equation facilitates a simple modeling of the dependence between returns and future volatility. Realized GARCH models with a linear or log-linear specification have many attractive features. They are parsimonious, simple to estimate, and imply an ARMA structure for the conditional variance and the realized measure. An empirical application with Dow Jones Industrial Average stocks and an exchange traded index fund shows that a simple Realized GARCH structure leads to substantial improvements in the empirical fit over standard GARCH models that only use daily returns.
Additional information:
Article first published online: 17 MAR 2011.
Cadmus permanent link: https://hdl.handle.net/1814/26007
Full-text via DOI: 10.1002/jae.1234
ISSN: 1099-1255
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