Research Details

Abstract

A voluminous literature has emerged for modeling the temporal dependencies in financial market volatility using ARCH and stochastic volatility models. While most of these studies have documented highly significant in-sample parameter estimates and pronounced intertemporal volatility persistence, traditional ex-post forecast evaluation criteria suggest that the models provide seemingly poor volatility forecasts. Contrary to this contention, we show that volatility models produce strikingly accurate interdaily forecasts for the latent volatility factor that would be of interest in most financial applications. New methods for improved ex-post interdaily volatility measurements based on high-frequency intradaily data are also discussed.

Type

Article

Author(s)

Torben Andersen, Tim Bollerslev

Date Published

1998

Citations

Andersen, Torben, and Tim Bollerslev. 1998. Answering the Skeptics: Yes, Standard Volatility Models Do Provide Accurate Forecasts. International Economic Review.(4): 885-905.