Exponential GARCH Modeling with Realized Measures of Volatility
35 Pages Posted: 25 May 2018
Date Written: April 2, 2015
We introduce the Realized Exponential GARCH model that can utilize multiple realized volatility measures for the modeling of a return series. The model specifies the dynamic properties of both returns and realized measures, and is characterized by a flexible modeling of the dependence between returns and volatility. We apply the model to 27 stocks and an exchange traded fund that tracks the S&P 500 index and find specifications with multiple realized measures that dominate those that rely on a single realized measure. The empirical analysis suggests some convenient simplifications and highlights the advantages of the new specification.
Keywords: EGARCH, High Frequency Data, Realized Variance, Leverage Effect
JEL Classification: C10, C22, C80
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