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From zero to hero: Realized partial (co)variances by Tim Bollerslev; Marcelo C. Medeiros; Andrew J. Patton; Rogier Quaedvlieg is a Economics, Econometrics and Finance article available to read on EtoBox.

What is From zero to hero: Realized partial (co)variances about?

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.

Who reads From zero to hero: Realized partial (co)variances?

Author

Tim Bollerslev; Marcelo C. Medeiros; Andrew J. Patton; Rogier Quaedvlieg

Publisher

Elsevier BV

Published

2022

Language

EN

Field

Economics, Econometrics and Finance (Social Sciences)