Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105710
Authors: 
Grassi, Stefano
Santucci de Magistris, Paolo
Year of Publication: 
2013
Series/Report no.: 
School of Economics Discussion Papers 1404
Abstract: 
The persistent nature of equity volatility is investigated by means of a multi-factor stochastic volatility model with time varying parameters. The parameters are estimated by means of a sequential matching procedure which adopts as auxiliary model a time-varying generalization of the HAR model for the realized volatility series. It emerges that during the recent financial crisis the relative weight of the daily component dominates over the monthly term. The estimates of the two factor stochastic volatility model suggest that the change in the dynamic structure of the realized volatility during the financial crisis is due to the increase in the volatility of the persistent volatility term. A set of Monte Carlo simulations highlights th correctness of the methodology adopted to extract the variability in the parameters.
Subjects: 
Time-Varying Parameters
On-line Kalman Filter
Simulation-based inference
Predictive Likelihood
Volatility Factors
JEL: 
G01
C00
C11
C58
Document Type: 
Working Paper

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