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Range-based volatility estimation and forecasting

Authors: Daniel Bencik;

Range-based volatility estimation and forecasting

Abstract

In this paper, we analyze new possibilities in predicting daily ranges, i.e. differences between daily high and low prices. We empirically assess efficiency gains in volatility estimation when using range-based estimators as opposed to simple daily ranges and explore the use of these more efficient volatility measures as predictors of daily ranges. The array of models used in this paper include the heterogeneous autoregressive model, conditional autoregressive ranges model and a vector error-correction model of daily highs and lows. Contrary to intuition, models based on co-integration of daily highs and lows fail to produce good quality out of sample forecasts of daily ranges. The best one-day-ahead daily ranges forecasts are produced by a realized range based HAR model with a GARCH volatility-of-volatility component.

Keywords

cointegration, ddc:330, volatility, prediction, futures contracts, returns, C52, volatility, returns, futures contracts, cointegration, prediction, C58, C53, jel: jel:C52, jel: jel:C53, jel: jel:C58

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
0
Average
Average
Average
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