Int J Fin Econ - 2020 - Yfanti - A three‐dimensional asymmetric power HEAVY model.pdf (2.81 MB)
A three-dimensional asymmetric power HEAVY model
journal contribution
posted on 2022-08-12, 11:22 authored by Stavroula Yfanti, Georgios Chortareas, Menelaos Karanasos, Emmanouil NoikokyrisThis article proposes the three‐dimensional HEAVY system of daily, intra‐daily, and range‐based volatility equations. We augment the bivariate model with a third volatility metric, the Garman–Klass estimator, and enrich the trivariate system with power transformations and asymmetries. Most importantly, we derive the theoretical properties of the multivariate asymmetric power model and explore its finite‐sample performance through a simulation experiment on the size and power properties of the diagnostic tests employed. Our empirical application shows that all three power transformed conditional variances are found to be significantly affected by the powers of squared returns, realized measure, and range‐based volatility as well. We demonstrate that the augmentation of the HEAVY framework with the range‐based volatility estimator, leverage and power effects improves remarkably its forecasting accuracy. Finally, our results reveal interesting insights for investments, market risk measurement, and policymaking.
History
School
- Business and Economics
Department
- Business
Published in
International Journal of Finance and EconomicsVolume
27Issue
3Pages
2737 - 2761Publisher
John Wiley & Sons LtdVersion
- VoR (Version of Record)
Rights holder
© The AuthorsPublisher statement
This is an Open Access Article. It is published by Wiley under the Creative Commons Attribution 4.0 International Licence (CC BY 4.0). Full details of this licence are available at: https://creativecommons.org/licenses/by/4.0/Acceptance date
2020-09-16Publication date
2020-10-09Copyright date
2020ISSN
1076-9307eISSN
1099-1158Publisher version
Language
- en