The HAR-RV-EMD-J Model and Its Application to Forecasting the Volatility of Financial Assets

Abstract

Abstract:

On the basis of the HAR-RV model, we develop a new HAR-type volatility model (i.e., HAR-RV-EMD-J model). Then we use 5-min high-frequency transaction data of the CSI 300 stock index and CSI 300 stock index futures as the study sample, and respectively analyzes the HAR-RV-EMD-J and the other four HAR-type volatility models. The results indicate that the high-frequency realized volatility, low-frequency realized volatility can be used to predict the future 1 day, 1 week, 2 week and 1 month volatilities, while the trend realized volatility and jump volatility are poor at its prediction accuracy. Besides, the HAR-RV-EMD-J model shows obviously better forecasting performance than the other HAR-type volatility models on forecasting the future volatilities of the CSI 300 stock index and CSI 300 stock index futures.

Key words: realized volatility, volatility forecasting, HAR-RV model, EMD method, SPA test

Gong Xu, Wen Fenghua, Huang Chuangxia, Yang Xiaoguang. The HAR-RV-EMD-J Model and Its Application to Forecasting the Volatility of Financial Assets[J]. , 2017, 29(1): 19-32.

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