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Forecasting realized volatility based on the truncated two-scales realized volatility estimator (TTSRV): Evidence from China's stock market

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  • Ping, Yuan
  • Li, Rui

Abstract

In this paper, the TTSRV (truncated two-scale realized volatility estimator), a novel estimator of the continuous part of realized volatility (RV), is used to forecast the RV of the SSEC index. Based on the classic heterogeneous autoregressive model for RV (HAR-RV), our new model, which applies the TTSRV, can describe the continuous and jump processes of RV with higher accuracy. The empirical results obtained by this study suggest that the TTSRV outperforms previous models in both statistical and economic aspects.

Suggested Citation

  • Ping, Yuan & Li, Rui, 2018. "Forecasting realized volatility based on the truncated two-scales realized volatility estimator (TTSRV): Evidence from China's stock market," Finance Research Letters, Elsevier, vol. 25(C), pages 222-229.
  • Handle: RePEc:eee:finlet:v:25:y:2018:i:c:p:222-229
    DOI: 10.1016/j.frl.2017.10.028
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    References listed on IDEAS

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    More about this item

    Keywords

    Realized volatility; Truncated two-scale; Forecast;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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