Template-type: ReDIF-Paper 1.0
Author-Name: David E. Allen
Author-Email: d.allen@ecu.edu.au
Author-Person: pal66
Author-Workplace-Name: School of Accounting, Finance and Economics Edith Cowan University, Australia.
Author-Name: Michael McAleer
Author-Person: pmc90 
Author-Workplace-Name: Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam and Tinbergen Institute,
	The Netherlands, Department of Quantitative Economics, Complutense University of Madrid, and Institute of
	Economic Research, Kyoto University. 
Author-Name: Marcel Scharth
Author-Email: m.scharth@vu.nl
Author-Person: psc385
Author-Workplace-Name: Department of Econometrics Faculty of Economics and Business Administration VU University Amsterdam 
	De Boelelaan 1105 1081 HV Amsterdam The Netherlands
Title: Realized volatility risk
Abstract: In this paper we document that realized variation measures constructed from high-frequency returns reveal 
	a large degree of volatility risk in stock and index returns, where we characterize volatility risk by the 
	extent to which forecasting errors in realized volatility are substantive. Even though returns standardized 
	by ex post quadratic variation measures are nearly gaussian, this unpredictability brings considerably more 
	uncertainty to the empirically relevant ex ante distribution of returns. Explicitly modeling this volatility 
	risk is fundamental.
 We propose a dually asymmetric realized volatility model, which incorporates the fact 
	that realized volatility series are systematically more volatile in high volatility periods. Returns in this 
	framework display time varying volatility, skewness and kurtosis. We provide a detailed account of the 
	empirical advantages of the model using data on the S&P 500 index and eight other indexes and stocks.
Keywords: Realized volatility, Volatility of volatility, Volatility risk, Value-at-risk, Forecasting, Conditional heteroskedasticity.
Length: 34 pages 
Creation-Date: 2013 
Number: 2013-26 
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1326.txt
File-URL: https://eprints.ucm.es/id/eprint/22385/1/1326.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1326