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Forecasting Comparison of Long Term Component Dynamic Models for Realized Covariance Matrices

Listed author(s):
  • Luc Bauwens
  • Manuela Braione
  • Giuseppe Storti
Registered author(s):

    Novel model specifications that include a time-varying long-run component in the dynamics of realized covariance matrices are proposed. The modelling framework allows the secular component to enter the model either additively or as a multiplicative factor, and to be specified parametrically, using a MIDAS filter, or non-parametrically. Estimation is performed by maximizing a Wishart quasi-likelihood function. The one-step ahead forecasting performance is assessed by means of three approaches: model confidence sets, minimum variance portfolios and Value-at-Risk. The results show that the proposed models outperform benchmarks incorporating a constant long-run component both in and out-of-sample.

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    File URL: http://www.jstor.org/stable/10.15609/annaeconstat2009.123-124.0103
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    Article provided by GENES in its journal Annals Of Economics and Statistics.

    Volume (Year): (2016)
    Issue (Month): 123-124 ()
    Pages: 103-134

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    Handle: RePEc:adr:anecst:y:2016:i:123-124:p:103-134
    DOI: 10.15609/annaeconstat2009.123-124.0103
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