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FloGARCH : Realizing long memory and asymmetries in returns volatility

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  • Harry Vander Elst

    () (Université libre de Bruxelles)

Abstract

We introduce the class of FloGARCH models in this paper. FloGARCH models provide a parsimonious joint model for low frequency returns and realized measures and are sufficiently flexible to capture long memory as well as asymmetries related to leverage effects. We analyze the performances of the models in a realistic numerical study and on the basis of a data set composed of 65 equities. Using more than 10 years of high-frequency transactions, we document significant statistical gains related to the FloGARCH models in terms of in-sample fit, out-of-sample fit and forecasting accuracy compared to classical and Realized GARCH models.

Suggested Citation

  • Harry Vander Elst, 2015. "FloGARCH : Realizing long memory and asymmetries in returns volatility," Working Paper Research 280, National Bank of Belgium.
  • Handle: RePEc:nbb:reswpp:201504-280
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    Cited by:

    1. Yves Dominicy & Harry-Paul Vander Elst, 2015. "Macro-Driven VaR Forecasts: From Very High to Very Low Frequency Data," Working Papers ECARES ECARES 2015-41, ULB -- Universite Libre de Bruxelles.

    More about this item

    Keywords

    Realized GARCH models; high-frequency data; long memory; realized measures.;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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