Order reprints

Testing the Lag Structure of Assets’ Realized Volatility Dynamics

Francesco Audrino Lorenzo Camponovo Constantin Roth

*Corresponding author: Francesco Audrino francesco.audrino@unisg.ch


A (conservative) test is applied to investigate the optimal lag structure for modelingrealized volatility dynamics. The testing procedure relies on the recent theoretical results that showthe ability of the adaptive least absolute shrinkage and selection operator (adaptive lasso) to combinee cient parameter estimation, variable selection, and valid inference for time series processes. In anapplication to several constituents of the S&P 500 index it is shown that (i) the optimal significantlag structure is time-varying and subject to drastic regime shifts that seem to happen across assetssimultaneously; (ii) in many cases the relevant information for prediction is included in the first 22lags, corroborating previous results concerning the accuracy and the diffculty of outperforming outof-sample the heterogeneous autoregressive (HAR) model; and (iii) some common features of theoptimal lag structure can be identified across assets belonging to the same market segment or showinga similar beta with respect to the market index.

Please supply your name and a valid email address you yourself

Fields marked*are required

Article URL   http://www.aimspress.com/QFE/article/1751.html
Article ID   QFE-01-00363
Editorial Email  
Your Name *
Your Email *
Quantity *

Copyright © AIMS Press All Rights Reserved