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: Post Doctoral Fellow, Australian School of Business, University of New South Wales
Title: Asymmetric 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 inpredictability 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.
Classification-JEL: C58, G12.
Keywords: Realized volatility; Volatility of volatility; Volatility risk; Value-at-risk; Forecasting; Conditional heteroskedasticity.
Length: 33 pages
Creation-Date: 2014-06 
Number: 2014-16
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1416.txt
File-URL: https://eprints.ucm.es/id/eprint/26053/1/1416.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1416