25 janvier 2019
Realized SemiCovariances: Looking for Signs of Direction Inside the Covariance Matrix
Tim Bollerslev, Duke University
We propose a new decomposition of the realized covariance matrix into four “realized semicovariance” components based on the signs of the underlying high-frequency returns. We derive the asymptotic distribution for the different components under the assumption of a continuous multivariate semimartingale and standard in fill asymptotic arguments. Based on high-frequency returns for a large cross-section of individual stocks, we document distinctly different features and dynamic dependencies in the different semicovariance components. We demonstrate that the accuracy of portfolio return variance forecasts may be significantly improved by exploiting these differences and “looking inside” the realized covariance matrices for signs of direction.
(co-authored by Andrew J. Patton (Duke University) and Rogier Quaedvlieg (Erasmus University Rotterdam)
The seminar will take place on Thursday, January 24 th from 16:30 until 18:00. The seminar will be held in the auditorium of the National Bank of Belgium (Room A), entrance: rue Montagne aux Herbes potagères 61, Brussels.
Please reply by email before Wednesday, January 23 rd to firstname.lastname@example.org if you wish to participate to this seminar or if you want to have an appointment with the speaker. In case you want to access the NBB Parking (rue Montagne aux Herbes potagères 41), please also provide us with your name and the license plate of your car.