Long Memory Versus Structural Breaks in Modeling and Forecasting Realized Volatility
Author | : Kyongwook Choi |
Publisher | : |
Total Pages | : 36 |
Release | : 2009 |
ISBN-10 | : OCLC:1290843732 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book Long Memory Versus Structural Breaks in Modeling and Forecasting Realized Volatility written by Kyongwook Choi and published by . This book was released on 2009 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We explore the possibility of structural breaks in the daily realized volatility of the Deutschemark/Dollar, Yen/Dollar and Yen/Deutschemark spot exchange rates with observed long-memory behavior. We find that structural breaks in the mean can partly explain the persistence of realized volatility. We propose a VAR-RV-Break model that provides superior predictive ability when the timing of future breaks is known. With unknown break dates and sizes, we find that a VAR-RV-I(d) long memory model provides a robust forecasting method even when the true financial volatility series are generated by structural breaks.