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Exponential GARCH Modeling with Realized Measures of Volatility

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  • Peter Reinhard Hansen

    ()
    (European University Institute and CREATES)

  • Zhuo Huang

    ()
    (Peking University, National School of Development, China Center for Economic Research)

Abstract

We introduce the Realized Exponential GARCH model that can utilize multiple realized volatility measures for the modeling of a return series. The model specifies the dynamic properties of both returns and realized measures, and is characterized by a flexible modeling of the dependence between returns and volatility. We apply the model to DJIA stocks and an exchange traded fund that tracks the S&P 500 index and find that specifications with multiple realized measures dominate those that rely on a single realized measure. The empirical analysis suggests some convenient simplifications and highlights the advantages of the new specification.

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Bibliographic Info

Paper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2012-44.

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Length: 29
Date of creation: 10 Oct 2012
Date of revision:
Handle: RePEc:aah:create:2012-44

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Web page: http://www.econ.au.dk/afn/

Related research

Keywords: EGARCH; High Frequency Data; Realized Variance; Leverage Effect.;

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  2. Visser, Marcel P., 2008. "Garch Parameter Estimation Using High-Frequency Data," MPRA Paper 9076, University Library of Munich, Germany.
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  19. Lumsdaine, Robin L, 1996. "Consistency and Asymptotic Normality of the Quasi-maximum Likelihood Estimator in IGARCH(1,1) and Covariance Stationary GARCH(1,1) Models," Econometrica, Econometric Society, vol. 64(3), pages 575-96, May.
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Cited by:
  1. Asger Lunde & Kasper V. Olesen, 2013. "Modeling and Forecasting the Distribution of Energy Forward Returns - Evidence from the Nordic Power Exchange," CREATES Research Papers 2013-19, School of Economics and Management, University of Aarhus.
  2. Peter Reinhard Hansen & Asger Lunde & Valeri Voev, 2012. "Realized Beta GARCH: A Multivariate GARCH Model with Realized Measures of Volatility and Covolatility," Global COE Hi-Stat Discussion Paper Series gd12-269, Institute of Economic Research, Hitotsubashi University.

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