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A realized EGARCH-MIDAS model with higher moments

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  • Wu, Xinyu
  • Xie, Haibin

Abstract

This paper proposes a realized EGARCH-MIDAS model with higher moments (REGARCH-MIDAS-SK) which combines the REGARCH-MIDAS model by Borup and Jakobsen (2019) and the REGARCH-SK model by Wu et al. (2019) to model volatility. A key feature of the proposed model is the ability to account for the high persistence of volatility and the time-varying non-Gaussianities of return distribution simultaneously. Empirical results show that the REGARCH-MIDAS-SK model outperforms the REGARCH model as well as the REGARCH-MIDAS and REGARCH-SK models both in terms of in-sample fit and out-of-sample forecast performance.

Suggested Citation

  • Wu, Xinyu & Xie, Haibin, 2021. "A realized EGARCH-MIDAS model with higher moments," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319308505
    DOI: 10.1016/j.frl.2019.101392
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    3. Wang, Lu & Zhao, Chenchen & Liang, Chao & Jiu, Song, 2022. "Predicting the volatility of China's new energy stock market: Deep insight from the realized EGARCH-MIDAS model," Finance Research Letters, Elsevier, vol. 48(C).

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    More about this item

    Keywords

    Realized EGARCH; Realized kernel; MIDAS; Volatility persistence; Higher moments;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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