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Augmenting the Realized-GARCH: the role of signed-jumps, attenuation-biases and long-memory effects

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  • Papantonis Ioannis

    (Department of Economics, Athens University of Economics and Business, 10434 Athens, Greece)

  • Rompolis Leonidas S.

    (Department of Accounting and Finance, Athens University of Economics and Business, 10434 Athens, Greece)

  • Tzavalis Elias

    (Department of Economics, Athens University of Economics and Business, 10434 Athens, Greece)

  • Agapitos Orestis

    (Department of Economics, Athens University of Economics and Business, 10434 Athens, Greece)

Abstract

This paper extends the Realized-GARCH framework, by allowing the conditional variance equation to incorporate exogenous variables related to intra-day realized measures. The choice of these measures is motivated by the so-called heterogeneous auto-regressive (HAR) class of models. Our augmented model is found to outperform both the Realized-GARCH and the various HAR models in terms of in-sample fitting and out-of-sample forecasting accuracy. The new model specification is examined under alternative parametric density assumptions for the return innovations. Non-normality seems to be very important for filtering the return innovations to which variance responds and helps significantly upon the prediction performance of the suggested model.

Suggested Citation

  • Papantonis Ioannis & Rompolis Leonidas S. & Tzavalis Elias & Agapitos Orestis, 2023. "Augmenting the Realized-GARCH: the role of signed-jumps, attenuation-biases and long-memory effects," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 27(2), pages 171-198, April.
  • Handle: RePEc:bpj:sndecm:v:27:y:2023:i:2:p:171-198:n:8
    DOI: 10.1515/snde-2020-0131
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