This paper conducts a comprehensive investigation of the "forecast combination puzzle" in the context of the heterogeneous autoregressive (HAR) model for volatility forecasting. The widely-used HAR model can be considered as a theoretically optimal combination of three random-walk forecasts...

This paper investigates the effect of characteristic-based time-varying factor beta on the diffusion-index type forecast. Specifically, the factor beta includes two distinct components: the "instrumental beta'' is a function of some observed stable variables, while the "idiosyncratic beta''...

Numerous tests designed to detect realized jumps over a fixed time span have been proposed and extensively studied in the financial econometrics literature. These tests differ from 'long time span tests' that detect jumps by examining the magnitude of the jump intensity parameter in the data...

Numerous tests designed to detect realized jumps over a fixed time span have been proposed and extensively studied in the financial econometrics literature. These tests differ from “long time span tests” that detect jumps by examining the magnitude of the intensity parameter in the data...

Numerous tests designed to detect realized jumps over a fixed time span have been proposed and extensively studied in the financial econometrics literature. These tests differ from “long time span tests” that detect jumps by examining the magnitude of the jump intensity parameter in the data...

In this paper, we propose and evaluate a shrinkage based methodology that is designed to improve the accuracy of forecasts of daily integrated volatility. Our approach is based on a two-step shrinkage procedure designed to extract latent common volatility factors from a large dimensional and...

In this paper, we use factor-augmented HAR-type models to predict the daily integrated volatility of asset returns. Our approach is based on a proposed two-step dimension reduction procedure designed to extract latent common volatility factors from a large dimensional and high-frequency returns...