New practice for investors in Chinese stock market: From perspective of fractionally integrated realized GARCH model
In this paper, based on the Realized GARCH model, the fractional integration Realized GARCH model is proposed by combining long memory parameters with conditional variance and replacing the original realized measure with the realized measure obtained after daily, weekly and monthly weighting. Based...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
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Elsevier
2023-03-01
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| Series: | Heliyon |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S2405844023012240 |
| _version_ | 1827972600854216704 |
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| author | Mei Xiao Zaiping Tao Zhouyi Gu Zhengxin Li Xihui Chen |
| author_facet | Mei Xiao Zaiping Tao Zhouyi Gu Zhengxin Li Xihui Chen |
| author_sort | Mei Xiao |
| collection | DOAJ |
| description | In this paper, based on the Realized GARCH model, the fractional integration Realized GARCH model is proposed by combining long memory parameters with conditional variance and replacing the original realized measure with the realized measure obtained after daily, weekly and monthly weighting. Based on the 5-min high-frequency data of the SSE index, the fractional integration Realized GARCH model, Realized HAR GARCH model and Realized GARCH model are investigated for their fitting effect and predictive ability on market volatility, and Monte Carlo simulations are conducted from the error terms obeying normal distribution, t-distribution and chi-square distribution so as to compare the RMSE and MAE of the three types of models with respect to conditional variance. The empirical results show that the fractionally integrated Realized GARCH model is found to better capture the long-run correlation in volatility in certain intervals by comparing the theoretical and sample auto-correlation functions, while the overall predictive power of the model is better than the other two models. Finally, it provides technical support and suggestions for investors' risk control. |
| first_indexed | 2024-04-09T19:24:18Z |
| format | Article |
| id | doaj.art-40b32d563e084d16bfc107f4ee9a397d |
| institution | Directory Open Access Journal |
| issn | 2405-8440 |
| language | English |
| last_indexed | 2024-04-09T19:24:18Z |
| publishDate | 2023-03-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Heliyon |
| spelling | doaj.art-40b32d563e084d16bfc107f4ee9a397d2023-04-05T08:20:22ZengElsevierHeliyon2405-84402023-03-0193e14017New practice for investors in Chinese stock market: From perspective of fractionally integrated realized GARCH modelMei Xiao0Zaiping Tao1Zhouyi Gu2Zhengxin Li3Xihui Chen4Library of Zhejiang Financial College, Hangzhou 310018, ChinaSchool of Information Technology,Zhejiang Financial College, Hangzhou 310018, ChinaSchool of Information Technology,Zhejiang Financial College, Hangzhou 310018, ChinaSchool of Management, Zhejiang Shuren University,Hangzhou 310015, China; *Corresponding author.School of Management, Zhejiang University of Technology,Hangzhou 310023, China; **Corresponding author.In this paper, based on the Realized GARCH model, the fractional integration Realized GARCH model is proposed by combining long memory parameters with conditional variance and replacing the original realized measure with the realized measure obtained after daily, weekly and monthly weighting. Based on the 5-min high-frequency data of the SSE index, the fractional integration Realized GARCH model, Realized HAR GARCH model and Realized GARCH model are investigated for their fitting effect and predictive ability on market volatility, and Monte Carlo simulations are conducted from the error terms obeying normal distribution, t-distribution and chi-square distribution so as to compare the RMSE and MAE of the three types of models with respect to conditional variance. The empirical results show that the fractionally integrated Realized GARCH model is found to better capture the long-run correlation in volatility in certain intervals by comparing the theoretical and sample auto-correlation functions, while the overall predictive power of the model is better than the other two models. Finally, it provides technical support and suggestions for investors' risk control.http://www.sciencedirect.com/science/article/pii/S2405844023012240Realized GARCHRealized HAR GARCHLong memoryHigh frequency dataFractional integration realized GARCH |
| spellingShingle | Mei Xiao Zaiping Tao Zhouyi Gu Zhengxin Li Xihui Chen New practice for investors in Chinese stock market: From perspective of fractionally integrated realized GARCH model Heliyon Realized GARCH Realized HAR GARCH Long memory High frequency data Fractional integration realized GARCH |
| title | New practice for investors in Chinese stock market: From perspective of fractionally integrated realized GARCH model |
| title_full | New practice for investors in Chinese stock market: From perspective of fractionally integrated realized GARCH model |
| title_fullStr | New practice for investors in Chinese stock market: From perspective of fractionally integrated realized GARCH model |
| title_full_unstemmed | New practice for investors in Chinese stock market: From perspective of fractionally integrated realized GARCH model |
| title_short | New practice for investors in Chinese stock market: From perspective of fractionally integrated realized GARCH model |
| title_sort | new practice for investors in chinese stock market from perspective of fractionally integrated realized garch model |
| topic | Realized GARCH Realized HAR GARCH Long memory High frequency data Fractional integration realized GARCH |
| url | http://www.sciencedirect.com/science/article/pii/S2405844023012240 |
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