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How useful is intraday data for evaluating daily Value-at-Risk?: evidence from three Euro rates

McMillan, David G., Speight, Alan E. H. and Evans, Kevin Philip 2008. How useful is intraday data for evaluating daily Value-at-Risk?: evidence from three Euro rates. Journal of Multinational Financial Management 18 (5) , pp. 488-503. 10.1016/j.mulfin.2007.12.003

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Previous research concerned with the investigation of intraday data has typically sought to model that data using techniques to control for intraday periodicity, has applied models of short-horizon and long-horizon dependencies, or has utilised intraday data in the construction of realised variance. Using Euro exchange rate data, we apply these different modelling strategies in forecasting daily volatility and calculating Value-at-Risk measures, benchmarked against a standard GARCH model for daily and raw intraday returns. Our results suggest that the use of intraday data provides improved daily volatility and VaR forecasts relative to daily data and daily realised volatility. Further, use of the raw intraday data, or intraday data subjected to a simple standardisation procedure, provides better forecasts and VaR measures than more complicated models for intraday periodicity. These results also hold in a multi-asset portfolio setting.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HA Statistics
H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
J Political Science > JN Political institutions (Europe)
Uncontrolled Keywords: Value-at-Risk; Volatility; Intraday data; Exchange rates
Publisher: Elsevier
ISSN: 1042-444X
Last Modified: 04 Jun 2017 03:14

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