Volatility forecast comparison using imperfect volatility.
|Abstract||The use of a conditionally unbiased, but imperfect, volatility proxy can lead to undesirable out- comes in standard methods for comparing conditional variance forecasts. We motivate our study with analytical results on the distortions caused by some widely-used loss functions, when used with stan-dard volatility proxies such as squared returns, the intra-daily range or realised volatility. We then derive necessary and sufficient conditions on the ... [truncated at 450 characters in length]|
|Creator||Andrew J. Patton;|