Exploiting Intraday Decompositions in Realized Volatility Forecasting: A Forecast Reconciliation Approach
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Abstract (arXiv)
We address the construction of Realized Variance (RV) forecasts by exploiting the hierarchical structure implicit in available decompositions of RV. By using data referred to the Dow Jones Industrial Average Index and to its constituents we show that exploiting the informative content of hierarchies improves the forecast accuracy. Forecasting performance is evaluated out-of-sample based on the empirical MSE and QLIKE criteria as well as using the Model Confidence Set approach.
Key facts. Cited by 1 paper in the map (data through 14 Oct 2026). First posted on arXiv 5 Jun 2023.
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