High-Low Range in GARCH Models of Stock Return Volatility

We suggest a simple and general way to improve the GARCH volatility models using the intraday range between the highest and the lowest price to proxy volatility. We illustrate the method by modifying a GARCH(1,1) model to a Range-GARCH(1,1) model. Our empirical analysis conducted on stocks, stock indices and simulated data shows that the Range-GARCH(1,1) model performs significantly better than the standard GARCH(1,1) model both in terms of in-sample fit and out-of-sample forecasting ability