Published in:XFi Centre for Finance and Investment Working Paper ; No. 07/11
Extent:
1 Online-Ressource (27 p)
Language:
Not determined
DOI:
10.2139/ssrn.1029570
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments October 2007 erstellt
Description:
There has recently been renewed interest in the intraday range (defined as the difference between the intraday high and low prices) as a measure of local volatility. Recent studies have shown that estimates of volatility based on the range are significantly more efficient than estimates based on the daily close-to-close return, are relatively robust to market microstructure noise, and are approximately log-normally distributed. However, little attention has so far been paid to forecasting volatility using the daily range. This is partly because there exists no multivariate analogue of the range and so its use is limited to the univariate case. In this paper, we propose a simple estimator of the multivariate conditional variance-covariance matrix of returns that combines both the return-based and range-based measures of volatility. The new estimator offers a significant improvement over the equivalent return-based estimator, both statistically and economically