RT Report
T1 Asymmetric Realized Volatility Risk
A1 Allen, David E.
A1 McAleer, Michael
A1 Scharth, Marcel
AB In this paper we document that realized variation measures constructed from high-frequency returns reveal a large degree of volatility risk in stock and index returns, where we characterize volatility risk by the extent to which forecasting errors in realized volatility are substantive. Even though returns standardized by ex post quadratic variation measures are nearly gaussian, this inpredictability brings considerably more uncertainty to the empirically relevant ex ante distribution of returns. Explicitly modeling this volatility risk is fundamental. We propose a dually asymmetric realized volatility model, which incorporates the fact that realized volatility series are systematically more volatile in high volatility periods. Returns in this framework display time varying volatility, skewness and kurtosis. We provide a detailed account of the empirical advantages of the model using data on the S&P 500 index and eight other indexes and stocks.
SN 2341-2356
YR 2014
FD 2014
LK https://hdl.handle.net/20.500.14352/41582
UL https://hdl.handle.net/20.500.14352/41582
LA eng
NO JEL Classification: C58, G12
DS Docta Complutense
RD 10 abr 2025