Out of sample forecasts of quadratic variation

Yacine Aït-Sahalia, Loriano Mancini

Research output: Contribution to journalArticle

77 Scopus citations

Abstract

We compare the forecasts of Quadratic Variation given by the Realized Volatility (RV) and the Two Scales Realized Volatility (TSRV) computed from high frequency data in the presence of market microstructure noise, under several different dynamics for the volatility process and assumptions on the noise. We show that TSRV largely outperforms RV, whether looking at bias, variance, RMSE or out-of-sample forecasting ability. An empirical application to all DJIA stocks confirms the simulation results.

Original languageEnglish (US)
Pages (from-to)17-33
Number of pages17
JournalJournal of Econometrics
Volume147
Issue number1
DOIs
StatePublished - Nov 2008

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Keywords

  • High frequency data
  • Market microstructure noise
  • Measurement error
  • Out of sample forecasts
  • Realized volatility
  • Two scales realized volatility

Fingerprint Dive into the research topics of 'Out of sample forecasts of quadratic variation'. Together they form a unique fingerprint.

  • Cite this