The benefits of using flight-to-safety (FTS) in volatility forecasting are assessed within a multivariate GARCH framework. In particular, we propose realized semi-covariance between falling equity and rising safe haven returns as a proxy of FTS and we use it to model the conditional distribution...

A model of portfolio return dynamics is developed in which the risk of price is permitted to be heterogeneous. In doing this, a novel method is proposed that delivers improved out-of-sample forecasts of portfolio returns. The main innovation is the use of a set of predictors that account for...