Do Jumps Matter? Forecasting Multivariate Realized Volatility Allowing for Common Jumps

Yin Liao (), Heather Anderson and Farshid Vahid

ANU Working Papers in Economics and Econometrics from Australian National University, College of Business and Economics, School of Economics

Abstract: Realized volatility of stock returns is often decomposed into two distinct components that are attributed to continuous price variation and jumps. This paper proposes a tobit multivariate factor model for the jumps coupled with a standard multivariate factor model for the continuous sample path to jointly forecast volatility in three Chinese Mainland stocks. Out of sample forecast analysis shows that separate multivariate factor models for the two volatility processes outperform a single multivariate factor model of realized volatility, and that a single multivariate factor model of realized volatility outperforms univariate models.

JEL-codes: C13 C32 C52 C53 G17 G32 (search for similar items in EconPapers)
Pages: 45 Pages
Date: 2010-05
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-for and nep-mst
References: Add references at CitEc
Citations: View citations in EconPapers (11)

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Working Paper: Do Jumps Matter? Forecasting Multivariate Realized Volatility allowing for Common Jumps (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:acb:cbeeco:2010-520

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