Opschoor, A. and Lucas, A. (2023). Time-varying variance and skewness in realized volatility measures International Journal of Forecasting, 39(2):827--840.
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Affiliated authors
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Publication year2023
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JournalInternational Journal of Forecasting
We propose new empirical models to capture the dynamics of the variance and skewness in realized volatility measures. We find that time-variation in variance and skewness of realized measures is a key empirical feature, even after accounting for well-known, stylized facts such as long-memory-type persistence and large incidental observations. Using a broad range of 89 US stocks across different sectors over 2001–2019, we show that these are not incidental phenomena of a few stocks but are widely shared. Accounting for dynamics in the variance and skewness of realized measures results in significantly better in-sample fit and out-of-sample unconditional density and quantile forecasts.