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.
2012
Proceedings of the XLVI Scientific Meeting
SIS-2012: XLVI Scientific Meeting
Rome
2012 - June
F. Cipollini; G.M. Gallo
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Utilizza questo identificatore per citare o creare un link a questa risorsa: https://hdl.handle.net/2158/777968
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