Template-type: ReDIF-Paper 1.0
Author-Name: Neil Shephard
Author-Email: neil.shephard@economics.ox.ac.uk
Author-Workplace-Name: Oxford-Man Institute and Department of Economics, University of Oxford
Author-Name:  Kevin Sheppard
Author-Email: kevin.sheppard@economics.ox.ac.uk
Author-Workplace-Name: Department of Economics and Oxford-Man Institute, University of Oxford
Title: Realising the future: forecasting with high frequency based volatility (HEAVY) models
Abstract:  This paper studies in some detail a class of high frequency based volatility (HEAVY) models.
These models are direct models of daily asset return volatility based on realized measures
constructed from high frequency data. Our analysis identifies that the models have momentum
and mean reversion effects, and that they adjust quickly to structural breaks in the level of the
volatility process. We study how to estimate the models and how they perform through the
credit crunch, comparing their fit to more traditional GARCH models. We analyse a model
based bootstrap which allow us to estimate the entire predictive distribution of returns. We
also provide an analysis of missing data in the context of these models.
Keywords: ARCH models; bootstrap; missing data; multiplicative error model; multistep ahead prediction; 
non-nested likelihood ratio test; realised kernel; realised volatility.
Length: 41 pages
Creation-Date: 2009-07-10
Number: 2009-W03
File-URL: http://www.nuffield.ox.ac.uk/economics/papers/2009/w3/heavy080709.pdf
File-Format: application/pdf
Handle: RePEc:nuf:econwp:0903