Global equity market volatilities forecasting: A comparison of leverage effects, jumps, and overnight information

This study extends the HAR-RV model to detailedly compare the role of leverage effects, jumps, and overnight information in predicting the realized volatilities (RV) of 21 international equity indices. First, the in-sample results suggest that these three factors have significantly negative impact for most of international equity markets. Second, the out-of-sample predictive results show that leverage effects and overnight information have stronger predictive power than jumps. Furthermore, we provide convincing results that the use of these three factors simultaneously can produce the best predictions for almost international equity markets at all forecast horizons. Finally, the empirical results from alternative prediction window, Direction-of-Change test, out-of-sample R2 test, alternative loss functions, and alternative volatility estimator confirm our results are robust.