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GARMA, HAR and Rules of Thumb for Modelling Realised Volatility
Version 1
: Received: 5 September 2023 / Approved: 6 September 2023 / Online: 6 September 2023 (10:26:40 CEST)
A peer-reviewed article of this Preprint also exists.
Allen, D.E.; Peiris, S. GARMA, HAR and Rules of Thumb for Modelling Realized Volatility. Risks 2023, 11, 179. Allen, D.E.; Peiris, S. GARMA, HAR and Rules of Thumb for Modelling Realized Volatility. Risks 2023, 11, 179.
Abstract
. This paper features an analysis of the relative effectiveness of a
variety of methods of modelling Realised Volatility (RV), namely:
the use of Gegenbaur processes in Auto-Regressive Moving Average format,
GARMA, as opposed to Heterogenous Auto-Regressive HAR models and simple rules of thumb. The analysis is applied to two data sets that feature the RV
of the S&P500 index, as sampled at 5 minute intervals, provided by
the Oxford Man RV database. The GARMA model does perform slightly
better than the HAR model, but both models are matched by a simple
rule of thumb regression model based on the application of lags of
squared, cubed and quartic, demeaned daily returns.
Keywords
GARMA; gegenbaur processes; HAR models; realised volatility; rules of thumb
Subject
Business, Economics and Management, Econometrics and Statistics
Copyright: This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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