| Author(s): |
PhDr. Vít Bubák, M.A., Ph.D.,
|
| Type: |
Articles in refereed journals |
| Year: |
2010 |
| Number: |
4 |
| ISSN / ISBN: |
|
| Published in: |
Czech Economic Review, 4/2010 |
| Publishing place: |
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| Keywords: |
intraday data, heterogeneous autoregressive model, mixed data sampling model, realized volatility, Value-at-Risk |
| JEL codes: |
C01, C32, C53, G32 |
| Suggested Citation: |
|
| Grants: |
IES Research Framework Institutional task (2005-2011) Integration of the Czech economy into European union and its development
|
| Abstract: |
In this study, we evaluate the quantile forecasts of the daily equity returns on three of the most liquid stocks traded on the Prague Stock Exchange. We follow the recent findings that consider the potential value of intraday information for volatility forecasting and, instead of proxying volatility using daily squared returns, we use both the intraday returns as well as their lower frequency aggregate (realized volatility) to forecast volatility and ultimately the quantiles of the distributions of future returns under different scenarios. We find that a simple autoregressive model for realized volatility together with the assumption of a normal distribution for expected returns results in VaR forecasts that are no worse than those based on other models (HAR, MIDAS) and/or other methods of computing the distribution of future returns. In fact, similar results obtain across the di fferent forecast horizons and at both 2.5% and 5% VaR levels despite superior performance of HAR model in out-of-sample volatility forecasts. |
