Measures of financial volatility exhibit clustering and persistence and can be jointly modeled as the element by element product of a vector of conditionally autoregressive scale factors and a multivariate i.i.d. innovation process (vector Multiplicative Error Model - vMEM). Since similar profiles are shared across measures, a restricted vMEM decomposes the conditional expected volatility into the sum of a common (persistent) component and a vector of measure specific components. With data on absolute returns, realized kernel volatility and daily range for the Dow Jones index, we show that indeed such a common component exists with the desired properties. The transitory components happen to have different features across volatility measures.
On the Extraction of a Common Persistent Component from Several Volatility Indicators / F. Cipollini; G.M. Gallo. - ELETTRONICO. - (2012), pp. 1-8. (Intervento presentato al convegno SIS-2012: XLVI Scientific Meeting tenutosi a Rome nel 2012 - June).
On the Extraction of a Common Persistent Component from Several Volatility Indicators
CIPOLLINI, FABRIZIO;GALLO, GIAMPIERO MARIA
2012
Abstract
Measures of financial volatility exhibit clustering and persistence and can be jointly modeled as the element by element product of a vector of conditionally autoregressive scale factors and a multivariate i.i.d. innovation process (vector Multiplicative Error Model - vMEM). Since similar profiles are shared across measures, a restricted vMEM decomposes the conditional expected volatility into the sum of a common (persistent) component and a vector of measure specific components. With data on absolute returns, realized kernel volatility and daily range for the Dow Jones index, we show that indeed such a common component exists with the desired properties. The transitory components happen to have different features across volatility measures.File | Dimensione | Formato | |
---|---|---|---|
SIS-2012-2376-3971-1-PB.pdf
Accesso chiuso
Tipologia:
Versione finale referata (Postprint, Accepted manuscript)
Licenza:
Tutti i diritti riservati
Dimensione
1.07 MB
Formato
Adobe PDF
|
1.07 MB | Adobe PDF | Richiedi una copia |
I documenti in FLORE sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.