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J. Risk Financial Manag. 2016, 9(3), 8; doi:10.3390/jrfm9030008

The Determinants of Equity Risk and Their Forecasting Implications: A Quantile Regression Perspective

1
Department of Economics and Management “Marco Fanno”, University of Padova, Via del Santo 22, 35123 Padova, Italy
2
Department of Statistical Sciences, University of Padova, Via Cesare Battisti 241, 35121 Padova, Italy
These authors contributed equally to this work.
*
Author to whom correspondence should be addressed.
Academic Editor: Michael McAleer
Received: 21 May 2016 / Revised: 22 June 2016 / Accepted: 29 June 2016 / Published: 7 July 2016
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Abstract

Several market and macro-level variables influence the evolution of equity risk in addition to the well-known volatility persistence. However, the impact of those covariates might change depending on the risk level, being different between low and high volatility states. By combining equity risk estimates, obtained from the Realized Range Volatility, corrected for microstructure noise and jumps, and quantile regression methods, we evaluate the forecasting implications of the equity risk determinants in different volatility states and, without distributional assumptions on the realized range innovations, we recover both the points and the conditional distribution forecasts. In addition, we analyse how the the relationships among the involved variables evolve over time, through a rolling window procedure. The results show evidence of the selected variables’ relevant impacts and, particularly during periods of market stress, highlight heterogeneous effects across quantiles. View Full-Text
Keywords: realized range volatility; quantile regression; volatility quantiles and density forecasting; forecast assessment realized range volatility; quantile regression; volatility quantiles and density forecasting; forecast assessment
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Bonaccolto, G.; Caporin, M. The Determinants of Equity Risk and Their Forecasting Implications: A Quantile Regression Perspective. J. Risk Financial Manag. 2016, 9, 8.

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