This paper offers a new approach for estimation and forecasting of the volatility of financial time series. No assumption is made about the parametric form of the processes, on the contrary we only suppose that the volatility can be approximated by a constant over some interval. In such a...

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...