Disentangling systematic and idiosyncratic dynamics in panels of volatility measures

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11230%2F14%3A10295822" target="_blank" >RIV/00216208:11230/14:10295822 - isvavai.cz</a>

Result on the web

<a href="http://dx.doi.org/10.1016/j.jeconom.2014.05.017" target="_blank" >http://dx.doi.org/10.1016/j.jeconom.2014.05.017</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1016/j.jeconom.2014.05.017" target="_blank" >10.1016/j.jeconom.2014.05.017</a>

Result language

angličtina

Original language name

Disentangling systematic and idiosyncratic dynamics in panels of volatility measures

Original language description

Realized volatilities observed across several assets show a common secular trend and some idiosyncratic pattern which we accommodate by extending the class of Multiplicative Error Models (MEMs). In our model, the common trend is estimated nonparametrically, while the idiosyncratic dynamics are assumed to follow univariate MEMs. Estimation theory based on seminonparametric methods is developed for this class of models for large cross-sections and large time dimensions. The methodology is illustrated using two panels of realized volatility measures between 2001 and 2008: the SPDR Sectoral Indices of the S&P500 and the constituents of the S&P100. Results show that the shape of the common volatility trend captures the overall level of risk in the market and that the idiosyncratic dynamics have a heterogeneous degree of persistence around the trend. Out-of-sample forecasting shows that the proposed methodology improves volatility prediction over several benchmark specifications.

Czech name

—

Czech description

—

Type

J_x - Unclassified - Peer-reviewed scientific article (Jimp, Jsc and Jost)

CEP classification

AH - Economics

OECD FORD branch

—

Project

<a href="/en/project/GA13-24313S" target="_blank" >GA13-24313S: Wavelet analysis of nonstationary and long memory economic time series</a><br>

Continuities

P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year

2014

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

Journal of Econometrics

ISSN

0304-4076

e-ISSN

—

Volume of the periodical

182

Issue of the periodical within the volume

2

Country of publishing house

NL - THE KINGDOM OF THE NETHERLANDS

Number of pages

21

Pages from-to

364-384

UT code for WoS article

000340335400008

EID of the result in the Scopus database

2-s2.0-84905020370