Original title: Forecasting realized volatility using machine learning and mixed-frequency data (the case of the Russian stock market)
Authors: Pyrlik, Vladimir ; Elizarov, P. ; Leonova, A.
Document type: Research reports
Year: 2021
Language: eng
Series: CERGE-EI Working Paper Series, volume: 713
Abstract: We assess the performance of selected machine learning algorithms (lasso, random forest, gradient boosting, and long short-term memory) in forecasting the daily realized volatility of returns of selected top stocks in the Russian stock market in comparison with a heterogeneous autoregressive realized volatility benchmark in 2018-2020. We seek to improve the predictive power of the models by including various economic indicators that carry information about future volatility. We find that lasso delivers a good combination of easy implementation and forecast precision. The other algorithms require fine-tuning and frequent re-training, otherwise they are likely to fail to outperform the benchmark often enough. Only the basic lagged log-RV values are significant explanatory variables in terms of the benchmark in-sample quality. Many economic indicators of mixed frequencies improve the predictive power of lasso though, including calendar and overnight effects, financial spillovers from local and global markets, and various macroeconomics indicators.
Keywords: heterogeneous autoregressive model; lasso; machine learning

Institution: Economics Institute AS ČR (web)
Document availability information: Fulltext is available at external website.
External URL: https://www.cerge-ei.cz/pdf/wp/Wp713.pdf
Original record: http://hdl.handle.net/11104/0325136

Permalink: http://www.nusl.cz/ntk/nusl-508260


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