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...

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 introduce a class of multi-frequency financial and macroeconomic uncertainty measures. The factors are latent variables extracted from a state space model that includes multiple different frequencies of non-parametrically estimated components of quadratic variation, as well as...

In recent years, the field of financial econometrics has seen tremendous gains in the amount of data available for use in modeling and prediction. Much of this data is very high frequency, and even 'tick-based', and hence falls into the category of what might be termed big data. The availability...

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...

It has been well known in financial economics that factor betas depend on observed instruments such as firm specific characteristics and macroeconomic variables, and a key object of interest is the effect of instruments on the factor betas. One of the key features of our model is that we specify...

We propose a new nonparametric test to identify mutually exciting jumps in high frequency data. We derive the asymptotic properties of the test statistics and show that the tests have good size and reasonable power in finite sample cases. Using our mutual excitation tests, we empirically...