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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26809
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| Title: | A Multiple Indicators Model For Volatility Using Intra-Daily Data |
| Authors: | Engle, Robert F.
Gallo, Giampiero M. |
| Keywords: | volatility modeling
volatility forecasting
GARCH
VIX
high-low range
realized volatility |
| Issue Date: | 12-Oct-2003 |
| Series/Report no.: | S-DRP-03-17 |
| Abstract: | Many ways exist to measure and model financial asset volatility. In
principle, as the frequency of the data increases, the quality of
forecasts should improve. Yet, there is no consensus about a
“true” or "best" measure of volatility. In this
paper we propose to jointly consider absolute daily returns, daily
high-low range and daily realized volatility to develop a forecasting
model based on their conditional dynamics. As all are non-negative
series, we develop a multiplicative error model that is consistent and
asymptotically normal under a wide range of specifications for the error
density function. The estimation results show significant interactions
between the indicators. We also show that one-month-ahead forecasts
match well (both in and out of sample) the market-based volatility
measure provided by an average of implied volatilities of index options
as measured by VIX. |
| URI: | http://hdl.handle.net/2451/26809 |
| Appears in Collections: | Derivatives Research
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