Stock market volatility forecasting: Do we need high-frequency data?

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216224%3A14560%2F21%3A00119320" target="_blank" >RIV/00216224:14560/21:00119320 - isvavai.cz</a>
Alternative codes found
RIV/61384399:31110/21:00056547
Result on the web
<a href="https://www.sciencedirect.com/science/article/pii/S0169207020301874" target="_blank" >https://www.sciencedirect.com/science/article/pii/S0169207020301874</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.1016/j.ijforecast.2020.12.001" target="_blank" >10.1016/j.ijforecast.2020.12.001</a>

Result language
angličtina
Original language name
Stock market volatility forecasting: Do we need high-frequency data?
Original language description
The general consensus in the volatility forecasting literature is that high-frequency volatility models outperform low-frequency volatility models. However, such a conclusion is reached when low-frequency volatility models are estimated from daily returns. Instead, we study this question considering daily, low-frequency volatility estimators based on open, high, low, and close daily prices. Our data sample consists of 18 stock market indices. We find that high-frequency volatility models tend to outperform low-frequency volatility models only for short-term forecasts. As the forecast horizon increases (up to one month), the difference in forecast accuracy becomes statistically indistinguishable for most market indices. To evaluate the practical implications of our results, we study a simple asset allocation problem. The results reveal that asset allocation based on high-frequency volatility model forecasts does not outperform asset allocation based on low-frequency volatility model forecasts.
Czech name
—
Czech description
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Type
J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database
CEP classification
—
OECD FORD branch
50206 - Finance

Project
<a href="/en/project/GA18-05829S" target="_blank" >GA18-05829S: Forecasting Volatility in Emerging Financial Markets</a><br>
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year
2021
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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