Document Type
Presentation
Publication Date
2006
Abstract
In this paper, we explore the possibilities of structural breaks in the realized volatility with the observed long-memory property for the Deutschemark/Dollar, Yen/Dollar and Yen/Deutschemark spot exchange rate realized volatility. The paper finds the substantial reduction of persistence of realized volatility after removing the breaks. Our VAR-RV-Break model provides the superior predictive ability compared to most of the forecasting models when the future break is known. The VAR-RV-I(d) long memory model, however, is still the best forecasting model even when the true financial volatility series are created by structural breaks with unknown break dates and size.
Recommended Citation
Yu, Wei-Choun; Choi, Kyongwook; and Zivot, Eric, "Long Memory versus Structural Breaks in Modeling and Forecasting Realized Volatility" (2006). Economics Seminar Series. 6.
https://repository.stcloudstate.edu/econ_seminars/6
