A factor approach to realized volatility forecasting in the presence of finite jumps and cross-sectional correlation in pricing errors

There is a growing literature on the realized volatility (RV) forecasting of asset returns using high-frequency data. We explore the possibility of forecasting RV with factor analysis; once considering the significant jumps. A real high-frequency financial data application suggests that the factor based approach is of significant potential interest and novelty.

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Year of publication:	2013
Authors:	Atak, Alev ; Kapetanios, George
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 120.2013, 2, p. 224-228
Publisher:	Elsevier
Subject:	Realized volatility \| Bipower variation \| Jump tests \| Factor models \| Volatility forecasting \| Model selection

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Type of publication:	Article
Classification:	C32 - Time-Series Models ; C50 - Econometric Modeling. General ; C52 - Model Evaluation and Testing ; C53 - Forecasting and Other Model Applications ; c58
Source:	RePEc - Research Papers in Economics

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