A new volatility model named GAS-HEAVY is introduced to model returns and realized measures of volatility jointly. The key features are fat-tailed distributions for returns and realized volatilities and autoregressive score-driven (GAS) model for dynamics of the latent volatility. By assuming a rescaled t distribution for daily returns and a rescaled F distributionfor realized volatility measures, the score dynamics for the latent volatility are robust to outliers and incidental large observations. Parameter restrictions are formulated to prove ergodicity and stationarity.Our simulation study shows that the new model fit data better than other alternatives. An empirical application of our model is provided to daily returns and 1-minute intraday high-frequency prices of Shanghai Composite Index,Shenzhen Component Index and CSI300 Index. The empirical evidences justify the superior volatility predictive ability of the new model in our paper.
SHEN Gen-xiang, ZOU Xin-yue
. GAS-HEAVY Model for Realized Measures of Volatility and Returns[J]. Chinese Journal of Management Science, 2019
, 27(1)
: 1
-10
.
DOI: 10.16381/j.cnki.issn1003-207x.2019.01.001
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