Correcting the Errors: A Note on Volatility Forecast Evaluation Based on High-Frequency Data and Realized Volatilities

Torben Andersen, Tim Bollerslev and Nour Meddahi

CIRANO Working Papers from CIRANO

Abstract: This note develops general model-free adjustment procedures for the calculation of unbiased volatility loss functions based on practically feasible realized volatility benchmarks. The procedures, which exploit the recent asymptotic distributional results in Barndorff-Nielsen and Shephard (2002a), are both easy-to-implement and highly accurate in empirically realistic situations. On properly accounting for the measurement errors in the volatility forecast evaluations reported in Andersen, Bollerslev, Diebold and Labys (2003), the adjustments result in markedly higher estimates for the true degree of return-volatility predictability. Cette note développe des méthodes d'ajustement, sans spécifier le modèle, qui corrigent le biais induit par les erreurs de mesures de la volatilité dans la mesure de performance des méthodes de prévision de la volatilité. Les procédures, qui utilisent la récente théorie asymptotique de Barndorff-Nielsen et Shephard (2002a), sont faciles à mettre en ?uvre et très performantes dans les situations empiriques usuelles. En particulier, la prise en compte des erreurs de mesures dans les procédures de prévision de Andersen, Bollerslev, Diebold et Labys (2003), amène à des performances de prévision de la volatilité très élevées.

Keywords: Measurement errors; model-free adjustment procedures; integrated volatility; realized volatility; high-frequency data; time series forecasting; Mincer-Zarnowitz regressions, Erreurs de mesure; méthode d'ajustement; volatilité intégrée, volatilité réalisée; données à haute fréquence; prévision de série chronologiques; régressions de Mincer-Zarnowitz (search for similar items in EconPapers)
Date: 2002-12-01
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-fin, nep-fmk, nep-mac and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Correcting the Errors: A Note on Volatility Forecast Evaluation Based on High-Frequency Data and Realized Volatilities (2002)
Working Paper: CORRECTING THE ERRORS: A NOTE ON VOLATILITY FORECAST EVALUATION BASED ON HIGH-FREQUENCY DATA AND REALIZED VOLATILITIES (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:cir:cirwor:2002s-91

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