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Exponential GARCH Modeling with Realized Measures of Volatility

  • Peter Reinhard Hansen
  • Zhuo Huang

We introduce the Realized Exponential GARCH model that can utilize multiple realized volatility measures for the modeling of a return series. The model specifies the dynamic properties of both returns and realized measures, and is characterized by a flexible modeling of the dependence between returns and volatility. We apply the model to DJIA stocks and an exchange traded fund that tracks the S&P 500 index and find that specifications with multiple realized measures dominate those that rely on a single realized measure. The empirical analysis suggests some convenient simplifications and highlights the advantages of the new specification.

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Paper provided by European University Institute in its series Economics Working Papers with number ECO2012/26.

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Date of creation: 2012
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Handle: RePEc:eui:euiwps:eco2012/26
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  25. O. E. Barndorff-Nielsen & P. Reinhard Hansen & A. Lunde & N. Shephard, 2009. "Realized kernels in practice: trades and quotes," Econometrics Journal, Royal Economic Society, vol. 12(3), pages C1-C32, November.
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