The impact of overnight returns on realized volatility

We obtain intraday data on three stock indices listed on the Taiwan Stock Exchange (TWSE), and then analyse the data by incorporating an overnight returns indicator into the 'Heterogeneous Auto-Regressive' (HAR) model of realized volatility. Our overall aim is to enhance the forecasting of...

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Bibliographic Details
Published in:Applied financial economics 2012-03, Vol.22 (5), p.357-364
Main Authors: Tseng, Tseng-Chan, Lai, Hung-Cheng, Lin, Cha-Fei
Format: Article
Language:English
Subjects:
Forecasting techniques
Forecasts
HAR-RV model
Heterogeneous Auto-Regressive model
high-frequency data
Indexes
overnight returns
Rates of return
realized variance
Regression analysis
Stock exchange
Stock returns
Studies
Taiwan
Taiwan Stock Exchange
Volatility
volatility forecasting
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Summary:We obtain intraday data on three stock indices listed on the Taiwan Stock Exchange (TWSE), and then analyse the data by incorporating an overnight returns indicator into the 'Heterogeneous Auto-Regressive' (HAR) model of realized volatility. Our overall aim is to enhance the forecasting of future volatility. Our findings demonstrate that the modified model significantly improves the forecasting performance of future realized volatility, with our results also being found to continue to hold for both in sample and out of sample forecasts.
ISSN:0960-3107
1466-4305
DOI:10.1080/09603107.2011.613760