The effect of realised volatility on stock returns risk estimates
AbstractIn this paper, we estimate minimum capital risk requirements for short, long positions and three investment horizons, using the traditional GARCH model and two other GARCH-type models that incorporate the possibility of asymmetric responses of volatility to price changes; and, most importantly, we analyse the models performance when realised volatility is included as an explanatory variable into the models' variance equations. The results suggest that the inclusion of realised volatility improves the models forecastability and their capacity to calculate accurate measures of minimum capital risk requirements.
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Bibliographic InfoPaper provided by Universidad Carlos III de Madrid in its series Open Access publications from Universidad Carlos III de Madrid with number info:hdl:10016/947.
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Asymmetry; High-Frequency data; Minimum capital risk requirements; Realised volatility;
Other versions of this item:
- Aurea Grane & Helena Veiga, 2007. "The effect of realised volatility on stock returns risk estimates," Statistics and Econometrics Working Papers ws076316, Universidad Carlos III, Departamento de Estadística y Econometría.
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
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- Louzis, Dimitrios P. & Xanthopoulos-Sisinis, Spyros & Refenes, Apostolos P., 2011. "Are realized volatility models good candidates for alternative Value at Risk prediction strategies?," MPRA Paper 30364, University Library of Munich, Germany.
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