Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2015-02-09
Number: 15-018/III
Author-Name: Manabu Asai
Author-Workplace-Name: Soka University, Japan
Author-Name: Michael McAleer
Author-Workplace-Name: National Tsing Hua University, Taiwan, Erasmus University Rotterdam, the Netherlands, Complutense University of Madrid, Spain
Title: The Impact of Jumps and Leverage in Forecasting Co-Volatility
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.
Classification-JEL: C32, C53, C58, G17
Keywords: Co-Volatility; Forecasting; Jump; Leverage Effects; Realized Covariance; Threshold
File-Url: https://papers.tinbergen.nl/15018.pdf
File-Format: application/pdf
File-Size: 194151 bytes
Handle: RePEc:tin:wpaper:20150018