Please use this identifier to cite or link to this item: http://hdl.handle.net/1893/32945
Appears in Collections:Accounting and Finance Journal Articles
Peer Review Status: Refereed
Title: Forecasting realized volatility: The role of implied volatility, leverage effect, overnight returns, and volatility of realized volatility
Author(s): Kambouroudis, Dimos
McMillan, David
Tsakou, Katerina
Contact Email: d.s.kambouroudis@stir.ac.uk
Keywords: HAR modeling and forecasting
implied volatility indices
leverage effect
overnight returns
realized volatility
Issue Date: 15-Jul-2021
Date Deposited: 16-Jul-2021
Citation: Kambouroudis D, McMillan D & Tsakou K (2021) Forecasting realized volatility: The role of implied volatility, leverage effect, overnight returns, and volatility of realized volatility. Journal of Futures Markets. https://doi.org/10.1002/fut.22241
Abstract: We forecast realized volatility extending the heterogeneous autoregressive model (HAR) to include implied volatility (IV), the leverage effect, overnight returns, and the volatility of realized volatility. We analyze 10 international stock indices finding that, although a simple HAR model augmented with IV (HAR-IV) is more accurate than any HAR model excluding it, all markets support further extensions of the HAR-IV model. More accurate forecasts are found using overnight returns in all markets except the UK, the volatility of realized volatility in the US, and the leverage effect in five markets. A value-at-risk exercise supports the economic significance of our findings.
DOI Link: 10.1002/fut.22241
Rights: © 2021 The Authors. Journal of Futures Markets published by Wiley Periodicals LLC This is an open access article under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0/), which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
Notes: Output Status: Forthcoming/Available Online
Licence URL(s): http://creativecommons.org/licenses/by/4.0/

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