Evaluating Combined Forecasts for Realized Volatility Using Asymmetric Loss Functions

Abstract

In this work we provide the findings of a forecast combination analysis carried out on the realized volatility series of three market indexes (DAX, CAC, and AEX). Two volatility types (5 minutes, kernel) have been considered. Different loss functions suggest that forecasts computed through combining models are generally more accurate than those provided by single models. However, the choice of the latter can significantly affect the goodness of the results.