A Model Confidence Set approach to the combination of multivariate volatility forecasts
In predicting conditional covariance matrices of financial portfolios, practitioners are required to choose among several alternative options, facing a number of different sources of uncertainty. A first source is related to the frequency at which prices are observed, either daily or intradaily. Using prices sampled at higher frequency inevitably poses additional sources of uncertainty related to the selection of the optimal intradaily sampling frequency and to the construction of the best realized estimator.