Using information quality for volatility model combinations
DOI: 10.1080/14697688.2012.739728
Title: Using information quality for volatility model combinations
Journal Title: Quantitative Finance
Volume: pages 1-19
Issue: pages 1-19
Publication Date: pages 1-19
Start Page: pages1-19
End Page: pages1-19
ISSN: 1469-7688
Affiliations:
a Department of Economics and Social Sciences , Helmut Schmidt University Hamburg , Germany
b Department of Statistics , University of Augsburg , Germany
Abstract: This paper proposes updated methodology for volatility model combinations which account for the informational content of innovations. An adaptive measure of information quality serves for the selection of model weights in order to improve daily volatility forecasts. The information quality proxy is related to the size of unexpected shocks in the volatility process. Our approach is illustrated in an empirical study with German stock market data.
Accepted: 8 Oct 2012

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