From zero to hero: Realized partial (co)variances
Abstract
This paper proposes a generalization of the class of realized semivariance and semicovariance
measures introduced by Barndorff-Nielsen et al. (2010) and Bollerslev et al. (2020a)
to allow for a finer decomposition of realized (co)variances. The new “realized partial
(co)variances” allow for multiple thresholds with various locations, rather than the
single fixed threshold of zero used in semi (co)variances. We adopt methods from machine
learning to choose the thresholds to maximize the out-of-sample forecast performance
of time series models based on realized partial (co)variances. We find that in low
dimensional settings it is hard, but not impossible, to improve upon the simple fixed
threshold of zero. In large dimensions, however, the zero threshold embedded in realized
semi covariances emerges as a robust choice.
Type
Journal articlePermalink
https://hdl.handle.net/10161/24064Published Version (Please cite this version)
10.1016/j.jeconom.2021.04.013Publication Info
Bollerslev, T; Medeiros, MC; Patton, AJ; & Quaedvlieg, R (2021). From zero to hero: Realized partial (co)variances. Journal of Econometrics. 10.1016/j.jeconom.2021.04.013. Retrieved from https://hdl.handle.net/10161/24064.This is constructed from limited available data and may be imprecise. To cite this
article, please review & use the official citation provided by the journal.
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Show full item recordScholars@Duke
Tim Bollerslev
Juanita and Clifton Kreps Distinguished Professor of Economics, in Trinity College
of Arts and Sciences
Professor Bollerslev conducts research in the areas of time-series econometrics, financial
econometrics, and empirical asset pricing finance. He is particularly well known
for his developments of econometric models and procedures for analyzing and forecasting
financial market volatility. Much of Bollerslev’s recent research has focused on
the analysis of newly available high-frequency intraday, or tick-by-tick, financial
data and so-called realized volatility measures, macroeconomic news annou
Andrew J. Patton
Zelter Family Distinguished Professor
Patton’s research interests lie in financial econometrics, with an emphasis on forecasting
volatility and dependence, forecast evaluation methods, and the analysis of hedge
funds and mutual funds. His research has appeared in a variety of academic journals,
including the Journal of Finance, Journal of Econometrics, Journal of Financial Economics,
Journal of the American Statistical Association, Review of Financial Studies, and
the Journal of Business and Economic Statistics. He has gi
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