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Long-memories and mean breaks in realized volatilities

Title
Long-memories and mean breaks in realized volatilities
Authors
Song, HyejinShin, Dong Wan
Ewha Authors
신동완
SCOPUS Author ID
신동완scopus
Issue Date
2015
Journal Title
APPLIED ECONOMICS LETTERS
ISSN
1350-4851JCR Link1466-4291JCR Link
Citation
vol. 22, no. 16, pp. 1273 - 1280
Keywords
breakforeign exchange ratehigh frequency datalong-memoryvolatility forecasting
Publisher
ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
Indexed
SSCI; SCOPUS WOS scopus
Abstract
An extended sequential test of Bai and Perron (1998) to a long-memory process is applied to four sets of realized volatilities (RVs) of the US dollar-EU euro, the Japan yen-US dollar, the Korea won-US dollar exchange rates and the S&P 500 index to find significant structural breaks in the means. Even after the mean breaks are adjusted out, the RVs still have persistent memories, which will be shown to produce better out-of-sample forecasts of RVs if properly addressed than ignored. Contrary to the recent report of Choi et al. (2010) that short-memory + break' models have better forecast power than long-memory only' models in forecasting some foreign exchange rate RVs, models with long-memory + mean breaks' turn out to produce better out-of-sample forecasts than models with short-memory + mean breaks' and models with long-memory only'.
DOI
10.1080/13504851.2015.1013605
Appears in Collections:
자연과학대학 > 통계학전공 > Journal papers
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