Article ID Journal Published Year Pages File Type
958678 Journal of Empirical Finance 2009 15 Pages PDF
Abstract

We estimate MIDAS regressions with various (bi)power variations to predict future volatility – measured via increments in quadratic variation. Instead of pre-determining the (bi)power variation we parameterize it and estimate the intra-daily return power transformation that optimally predicts future increments in quadratic variation. We find that the longer the prediction horizon, the smaller the optimal power transformation.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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