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Measuring downside risk-realised semivariance

Author

Listed:
  • Ole E. Barndorff-Nielsen

    () (Dept of Mathematical Sciences, University of Aarhus)

  • Silja Kinnebrock

    () (Oxford-Man Institute and Merton College, University of Oxford)

  • Neil Shephard

    () (Oxford-Man Institute and Dept of Economics, Oxford University)

Abstract

We propose a new measure of risk, based entirely on downwards moves measured using high frequency data. Realised semivariances are shown to have important predictive qualities for future market volatility. The theory of these new measures is spelt out, drawing on some new results from probability theory.

Suggested Citation

  • Ole E. Barndorff-Nielsen & Silja Kinnebrock & Neil Shephard, 2008. "Measuring downside risk-realised semivariance," Economics Papers 2008-W02, Economics Group, Nuffield College, University of Oxford.
  • Handle: RePEc:nuf:econwp:0802
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    File URL: http://www.nuffield.ox.ac.uk/economics/papers/2008/w2/downside.pdf
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    References listed on IDEAS

    as
    1. Ole E. Barndorff-Nielsen & Neil Shephard, 2006. "Econometrics of Testing for Jumps in Financial Economics Using Bipower Variation," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 4(1), pages 1-30.
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    Citations

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    Cited by:

    1. Xilong Chen & Eric Ghysels, 2011. "News--Good or Bad--and Its Impact on Volatility Predictions over Multiple Horizons," Review of Financial Studies, Society for Financial Studies, pages 46-81.
    2. Chevallier, Julien & Sévi, Benoît, 2012. "On the volatility–volume relationship in energy futures markets using intraday data," Energy Economics, Elsevier, pages 1896-1909.
    3. Clements, A.E. & Hurn, A.S. & Volkov, V.V., 2015. "Volatility transmission in global financial markets," Journal of Empirical Finance, Elsevier, pages 3-18.
    4. Haugom, Erik & Langeland, Henrik & Molnár, Peter & Westgaard, Sjur, 2014. "Forecasting volatility of the U.S. oil market," Journal of Banking & Finance, Elsevier, vol. 47(C), pages 1-14.
    5. Svetlana Borovkova & Diego Mahakena, 2015. "News, volatility and jumps: the case of natural gas futures," Quantitative Finance, Taylor & Francis Journals, pages 1217-1242.
    6. repec:eee:eneeco:v:67:y:2017:i:c:p:410-422 is not listed on IDEAS
    7. repec:eee:phsmap:v:481:y:2017:i:c:p:153-159 is not listed on IDEAS
    8. Chevallier, Julien & Sévi, Benoît, 2012. "On the volatility–volume relationship in energy futures markets using intraday data," Energy Economics, Elsevier, pages 1896-1909.
    9. Peter, Eckley, 2015. "Measuring economic uncertainty using news-media textual data," MPRA Paper 64874, University Library of Munich, Germany, revised 01 May 2015.
    10. Nolte, Ingmar & Xu, Qi, 2015. "The economic value of volatility timing with realized jumps," Journal of Empirical Finance, Elsevier, pages 45-59.

    More about this item

    Keywords

    Market frictions; Quadratic variation; Realised variance; Semimartingale; Semivariance;

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • 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

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