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Why It Is Ok To Use The Har-Rv(1,5,21) Model

Author

Listed:
  • Mihaela Craioveanu

    () (University of Central Missouri)

  • Eric Hillebrand

    () (Aarhus University)

Abstract

The lag structure (1,5,21) is most commonly used for the HAR-RV model for realized volatility (Corsi 2009), where the terms are thought to represent a daily, a weekly, and a monthly time scale. The aggregation of the three scales approximates long mem- ory. We explore flexible lag selection for the model on realized volatility constructed from tick-level data of the thirty constituting stocks of the Dow Jones Industrial Average between 1995 and 2007. The computational costs for flexible lag selection are substantial, and we use a parallel computing environment. We find that flexible lags do not improve in-sample or out-of-sample fit. Our results therefore confirm the standard practice in a large-scale data application.

Suggested Citation

  • Mihaela Craioveanu & Eric Hillebrand, 2012. "Why It Is Ok To Use The Har-Rv(1,5,21) Model," Working Papers 1201, University of Central Missouri, Department of Economics & Finance, revised Aug 2012.
  • Handle: RePEc:umn:wpaper:1201
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    Cited by:

    1. Francesco Audrino & Simon D. Knaus, 2016. "Lassoing the HAR Model: A Model Selection Perspective on Realized Volatility Dynamics," Econometric Reviews, Taylor & Francis Journals, vol. 35(8-10), pages 1485-1521, December.
    2. Hui Qu & Ping Ji, 2016. "Modeling Realized Volatility Dynamics with a Genetic Algorithm," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 35(5), pages 434-444, August.
    3. repec:ris:apltrx:0331 is not listed on IDEAS
    4. Shcherba, Alexandr, 2014. "Comparing «Realized volatility» models in the VaR calculation for the Russian equity market," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 34(2), pages 120-136.
    5. Fengler, Matthias R. & Mammen, Enno & Vogt, Michael, 2013. "Additive modeling of realized variance: tests for parametric specifications and structural breaks," Economics Working Paper Series 1332, University of St. Gallen, School of Economics and Political Science.
    6. Lahaye, Jerome & Shaw, Philip, 2014. "Can we reject linearity in an HAR-RV model for the S&P 500? Insights from a nonparametric HAR-RV," Economics Letters, Elsevier, vol. 125(1), pages 43-46.
    7. repec:dau:papers:123456789/6805 is not listed on IDEAS

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    Keywords

    Time Series; Financial Econometrics; HAR-RV Model;

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