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Forecasting the Volatility of Australian Stock Returns: Do Common Factors Help?

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  • Anderson, Heather M.
  • Vahid, Farshid

Abstract

This paper develops univariate and multivariate forecasting models for realized volatility in Australian stocks. We consider multivariate models with common features or common factors, and we suggest estimation procedures for approximate factor models that are robust to jumps when the cross-sectional dimension is not very large. Our forecast analysis shows that multivariate models outperform univariate models, but that there is little difference between simple and sophisticated factor models.
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Suggested Citation

  • Anderson, Heather M. & Vahid, Farshid, 2007. "Forecasting the Volatility of Australian Stock Returns: Do Common Factors Help?," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 76-90, January.
    • Handle: RePEc:bes:jnlbes:v:25:y:2007:p:76-90
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    More about this item

    JEL classification:

    • 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
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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