There is a growing literature on the realized volatility (RV) forecasting of asset returns using high-frequency data. We explore the possibility of forecasting RV with factor analysis; once considering the significant jumps. A real high-frequency financial data application suggests that the...

This paper suggests using a unit t-value criterion in imposing restrictions on lags to formulate a subset vector autoregressive (VAR) model for the purpose of point forecasts. Among any other alternative models nested to the initial VAR model, this less restrictive modeling strategy produces the...

This paper shows that the excessive volatility results in spurious regressions. The spuriousness can be driven by persistency in the error variances unlike the conventional spurious regressions that are generated by the persistency in the level of regression errors.

This article tests the linearity assumption underlying the popular heterogeneous autoregressive model for realized volatility (HAR-RV). We implement a consistent model specification test that is robust to both distributional and model misspecification. We find that, using a nonparametric HAR-RV...

In an influential work by Diebold and Inoue (2001), the Markov switching model was shown to exhibit long memory, in terms of the behavior of the second moments of partial sums. The relationship between the Markov switching model and long memory is reexamined here. Common estimators of the long...

An alternative central limit theorem for martingale difference arrays is presented. It can be deduced from the literature but it is not stated as such. It can be very useful for statisticians and econometricians. An illustration is given in the context of ARMA models with time-dependent...