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A new measure of realized volatility: Inertial and reverse realized semivariance

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  • Luo, Xin
  • Tao, Yunqing
  • Zou, Kai

Abstract

In this study, based on inertial and reverse price movements, a new measure of realized volatility, inertial realized semivariance (IRV) and reverse realized semivariance (RRV), was proposed. The limit property of the inertial and reverse realized semivariances is established from probability theory. Through the analysis on high frequency data, it shows that IRV and RRV both are effective measures of variation of asset prices and, that RRV and reverse jump variation (RJV) exhibited significant prediction capabilities for future returns. Empirical results of China Securities Index 300 (CSI 300) also show that this new measure of realized volatility has good prediction performance for future realized variances and returns.

Suggested Citation

  • Luo, Xin & Tao, Yunqing & Zou, Kai, 2022. "A new measure of realized volatility: Inertial and reverse realized semivariance," Finance Research Letters, Elsevier, vol. 47(PA).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321005882
    DOI: 10.1016/j.frl.2021.102658
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    More about this item

    Keywords

    Realized volatility; Inertial realized semivariance: Reverse realized semivariance; Model confidence set;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • G1 - Financial Economics - - General Financial Markets

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