Visser, Marcel P. (2008): Forecasting S&P 500 Daily Volatility using a Proxy for Downward Price Pressure.
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This paper decomposes volatility proxies according to upward and downward price movements in high-frequency financial data, and uses this decomposition for forecasting volatility. The paper introduces a simple Garch-type discrete time model that incorporates such high-frequency based statistics into a forecast equation for daily volatility. Analysis of S&P 500 index tick data over the years 1988-2006 shows that taking into account the downward movements improves forecast accuracy significantly. The R2 statistic for evaluating daily volatility forecasts attains a value of 0.80, both for in-sample and out-of-sample prediction.
|Item Type:||MPRA Paper|
|Original Title:||Forecasting S&P 500 Daily Volatility using a Proxy for Downward Price Pressure|
|Keywords:||volatility proxy; downward absolute power variation; log-Garch; volatility asymmetry; leverage effect; SP500; volatility forecasting; high-frequency data|
|Subjects:||C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Prediction Methods ; Simulation Methods
C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes
G - Financial Economics > G1 - General Financial Markets > G10 - General
|Depositing User:||Marcel Visser|
|Date Deposited:||14. Oct 2008 13:39|
|Last Modified:||11. Feb 2013 22:57|
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