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Moment-based estimation of stochastic volatility

Author

Listed:
  • Bregantini, Daniele
Abstract
This paper makes use of the distributional information contained in high-frequency data to test for the specification of the functional form of the volatility process within the class of stochastic volatility models.

Suggested Citation

  • Bregantini, Daniele, 2013. "Moment-based estimation of stochastic volatility," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 4755-4764.
    • Handle: RePEc:eee:jbfina:v:37:y:2013:i:12:p:4755-4764
    DOI: 10.1016/j.jbankfin.2013.08.008
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    References listed on IDEAS

    as
    1. Andersen T. G & Bollerslev T. & Diebold F. X & Labys P., 2001. "The Distribution of Realized Exchange Rate Volatility," Journal of the American Statistical Association, American Statistical Association, vol. 96, pages 42-55, March.
    2. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    3. Bjørn Eraker & Michael Johannes & Nicholas Polson, 2003. "The Impact of Jumps in Volatility and Returns," Journal of Finance, American Finance Association, vol. 58(3), pages 1269-1300, June.
    4. Bollerslev, Tim & Law, Tzuo Hann & Tauchen, George, 2008. "Risk, jumps, and diversification," Journal of Econometrics, Elsevier, vol. 144(1), pages 234-256, May.
    5. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Paul Labys, 2003. "Modeling and Forecasting Realized Volatility," Econometrica, Econometric Society, vol. 71(2), pages 579-625, March.
    6. Todorov, Viktor, 2009. "Estimation of continuous-time stochastic volatility models with jumps using high-frequency data," Journal of Econometrics, Elsevier, vol. 148(2), pages 131-148, February.
    7. MEDDAHI, Nour, 2001. "An Eigenfunction Approach for Volatility Modeling," Cahiers de recherche 2001-29, Universite de Montreal, Departement de sciences economiques.
    8. Ole E. Barndorff-Nielsen, 2004. "Power and Bipower Variation with Stochastic Volatility and Jumps," Journal of Financial Econometrics, Oxford University Press, vol. 2(1), pages 1-37.
    9. Isao Ishida & Michael McAleer & Kosuke Oya, 2011. "Estimating the Leverage Parameter of Continuous-time Stochastic Volatility Models Using High Frequency S&P 500 and VIX," Working Papers in Economics 11/11, University of Canterbury, Department of Economics and Finance.
    10. Valentina Corradi & Walter Distaso, 2006. "Semi-Parametric Comparison of Stochastic Volatility Models using Realized Measures," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(3), pages 635-667.
    11. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold, 2007. "Roughing It Up: Including Jump Components in the Measurement, Modeling, and Forecasting of Return Volatility," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 701-720, November.
    12. Torben G. Andersen & Luca Benzoni & Jesper Lund, 2002. "An Empirical Investigation of Continuous‐Time Equity Return Models," Journal of Finance, American Finance Association, vol. 57(3), pages 1239-1284, June.
    13. repec:bla:jfinan:v:59:y:2004:i:3:p:1367-1404 is not listed on IDEAS
    14. Chernozhukov, Victor & Hong, Han, 2003. "An MCMC approach to classical estimation," Journal of Econometrics, Elsevier, vol. 115(2), pages 293-346, August.
    15. Heston, Steven L, 1993. "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options," The Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 327-343.
    16. Xin Huang & George Tauchen, 2005. "The Relative Contribution of Jumps to Total Price Variance," Journal of Financial Econometrics, Oxford University Press, vol. 3(4), pages 456-499.
    17. Andersen, Torben G. & Bollerslev, Tim & Dobrev, Dobrislav, 2007. "No-arbitrage semi-martingale restrictions for continuous-time volatility models subject to leverage effects, jumps and i.i.d. noise: Theory and testable distributional implications," Journal of Econometrics, Elsevier, vol. 138(1), pages 125-180, May.
    18. repec:bla:jfinan:v:59:y:2004:i:1:p:227-260 is not listed on IDEAS
    19. Ishida, I. & McAleer, M.J. & Oya, K., 2011. "Estimating the Leverage Parameter of Continuous-time Stochastic Volatility Models Using High Frequency S&P 500 VIX," Econometric Institute Research Papers EI 2011-10, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    20. Jean Jacod & Viktor Todorov, 2010. "Do price and volatility jump together?," Papers 1010.4990, arXiv.org.
    21. Garcia, René & Lewis, Marc-André & Pastorello, Sergio & Renault, Éric, 2011. "Estimation of objective and risk-neutral distributions based on moments of integrated volatility," Journal of Econometrics, Elsevier, vol. 160(1), pages 22-32, January.
    22. Bollerslev, Tim & Zhou, Hao, 2002. "Estimating stochastic volatility diffusion using conditional moments of integrated volatility," Journal of Econometrics, Elsevier, vol. 109(1), pages 33-65, July.
    23. Hansen, Peter R. & Lunde, Asger, 2006. "Realized Variance and Market Microstructure Noise," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 127-161, April.
    24. Ole E. Barndorff‐Nielsen & Neil Shephard, 2001. "Non‐Gaussian Ornstein–Uhlenbeck‐based models and some of their uses in financial economics," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 63(2), pages 167-241.
    25. Bates, David S, 1996. "Jumps and Stochastic Volatility: Exchange Rate Processes Implicit in Deutsche Mark Options," The Review of Financial Studies, Society for Financial Studies, vol. 9(1), pages 69-107.
    26. Tauchen, George & Zhou, Hao, 2011. "Realized jumps on financial markets and predicting credit spreads," Journal of Econometrics, Elsevier, vol. 160(1), pages 102-118, January.
    27. Back, Kerry, 1991. "Asset pricing for general processes," Journal of Mathematical Economics, Elsevier, vol. 20(4), pages 371-395.
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    Cited by:

    1. KiHoon Jimmy Hong & Eliza Wu, 2014. "Can Momentum Factors Be Used to Enhance Accounting Information based Fundamental Analysis in Explaining Stock Price Movements?," Research Paper Series 346, Quantitative Finance Research Centre, University of Technology, Sydney.
    2. Wang, Cheng & Bouri, Elie & Xu, Yahua & Zhang, Dingsheng, 2023. "Intraday and overnight tail risks and return predictability in the crude oil market: Evidence from oil-related regular news and extreme shocks," Energy Economics, Elsevier, vol. 127(PB).
    3. Hong, KiHoon & Wu, Eliza, 2016. "The roles of past returns and firm fundamentals in driving US stock price movements," International Review of Financial Analysis, Elsevier, vol. 43(C), pages 62-75.

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    More about this item

    Keywords

    Stochastic volatility; Realised volatility; Jumps;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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