2015-02-01
The Impact of Jumps and Leverage in Forecasting Co-Volatility
Publication
Publication
Abstract
The paper investigates the impact of jumps in forecasting co-volatility, accommodating leverage effects. We modify the jump-robust two time scale covariance estimator of Boudt and Zhang (2013)such that the estimated matrix is positive definite. Using this approach we can disentangle the estimates of the integrated co-volatility matrix and jump variations from the quadratic covariation matrix. Empirical results for three stocks traded on the New York Stock Exchange indicate that the co-jumps of two assets have a significant impact on future co-volatility, but that the impact is negligible for forecasting weekly and monthly horizons.
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Tinbergen Institute | |
hdl.handle.net/1765/77761 | |
Tinbergen Institute Discussion Paper Series | |
Organisation | Erasmus School of Economics |
Asai, M., & McAleer, M. (2015). The Impact of Jumps and Leverage in
Forecasting Co-Volatility (No. TI TI 2015-018/III). Tinbergen Institute Discussion Paper Series. Retrieved from http://hdl.handle.net/1765/77761 |