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Exponential GARCH Modeling With Realized Measures of Volatility |
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| Authors: | Peter Reinhard Hansen Zhuo Huang |
| Institution: | 1. European University Institute, 50014 San Domenico di Fiesole FI, Italy, University of North Carolina, Chapel Hill, NC, USA, and CREATES, Aarhus University, 8000 Aarhus C, Denmark peter.hansen@eui.eu;2. National School of Development, China Center for Economic Research, Peking University, Beijing, China zhuohuang@nsd.pku.edu.cn |
| Abstract: | We introduce the realized exponential GARCH model that can use 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 27 stocks and an exchange traded fund that tracks the S&P 500 index and find specifications with multiple realized measures that dominate those that rely on a single realized measure. The empirical analysis suggests some convenient simplifications and highlights the advantages of the new specification. |
| Keywords: | EGARCH High-frequency data Leverage effect Realized variance |