Template-type: ReDif-Paper 1.0
Author-Name: Cubadda, G.
Author-workplace-name: Externe publicaties SBE
Author-Name: Guardabascio, B.
Author-Name: Hecq, A.W.
Author-workplace-name: Quantitative Economics
Title: A Vector Heterogeneous Autoregressive Index model for realized volatility measures
Abstract: This paper introduces a new modelling for detecting the presence of commonalities in a set of realized volatility measures. In particular, we propose a multivariate generalization of the heterogeneous autoregressive model (HAR) that is endowed with a common index structure. The Vector Heterogeneous Autoregressive Index model has the property to generate a common index that preserves the same temporal cascade structure as in the HAR model, a feature that is not shared by other aggregation methods (e.g., principal components). The parameters of this model can be easily estimated by a proper switching algorithm that increases the Gaussian likelihood at each step. We illustrate our approach with an empirical analysis aiming at combining several realized volatility measures of the same equity index for three different markets.
Series: GSBE Research Memoranda
Creation-Date: 20150101
Number: 033
File-URL: https://cris.maastrichtuniversity.nl/ws/files/1013928/guid-3bc6b98b-c876-46b7-84d0-8734efeb991c-ASSET1.0.pdf
File-Format: application/pdf
File-Size: 362731
Handle: Repec:unm:umagsb:2015033
DOI: 10.26481/umagsb.2015033