Publicação

Asymmetry, realised volatility and stock return risk estimates

Detalhes bibliográficos
Resumo:	In this paper we estimate minimum capital risk requirements for short and long positions with three investment horizons, using the traditional GARCH model and two other GARCH-type models that incorporate the possibility of asymmetric responses of volatility to price changes. We also address the problem of the extremely high estimated persistence of the GARCH model to generate observed volatility patterns by including realised volatility as an explanatory variable into the model’s variance equation. The results suggest that the inclusion of realised volatility improves the GARCH forecastability as well as its ability to calculate accurate minimum capital risk requirements and makes it quite competitive when compared with asymmetric conditional heteroscedastic models such as the GJR and the EGARCH.
Autores principais:	Grané, Aurea
Outros Autores:	Veiga, Helena
Assunto:	Asymmetry High-frequency data Minimum capital risk requirements Realised volatility
Ano:	2012
País:	Portugal
Tipo de documento:	artigo
Tipo de acesso:	acesso restrito
Instituição associada:	Universidade de Lisboa
Idioma:	inglês
Origem:	Repositório da Universidade de Lisboa

Descrição
Resumo:	In this paper we estimate minimum capital risk requirements for short and long positions with three investment horizons, using the traditional GARCH model and two other GARCH-type models that incorporate the possibility of asymmetric responses of volatility to price changes. We also address the problem of the extremely high estimated persistence of the GARCH model to generate observed volatility patterns by including realised volatility as an explanatory variable into the model’s variance equation. The results suggest that the inclusion of realised volatility improves the GARCH forecastability as well as its ability to calculate accurate minimum capital risk requirements and makes it quite competitive when compared with asymmetric conditional heteroscedastic models such as the GJR and the EGARCH.