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Prateek Sharma and Swati Sharma
 
''Forecasting gains of robust realized variance estimators: evidence from European stock markets''
( 2015, Vol. 35 No.1 )
 
 
The classical realized variance (RV) estimator is biased due to microstructure effects and asset price jumps. Robust realized variance (RRV) estimators adjust for these biases, and make more efficient of use of the intraday data. This article examines the benefits of using RRV estimators instead of the RV estimator, in the context of volatility forecasting. The recently proposed Realized GARCH framework is used to generate daily forecasts of the conditional variance for eight European stock indices. The out-of-sample comparisons indicate that the RRV estimators improve upon the RV estimator on efficiency and bias criteria.
 
 
Keywords: Realized Variance, Realized GARCH, realized kernel, forecasting, volatility, Bipower variation, Microstructure noise
JEL: G1 - (G11, G13, G13) Portfolios, Investments, Asset and Futures Pricing, Trading Volume & Bond Interest Rates
 
Manuscript Received : Feb 17 2015 Manuscript Accepted : Mar 11 2015

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