Combining Multivariate Volatility Models
Forecasting conditional covariance matrices of returns involves a variety of modeling options. First, the choice between models based on daily or intradaily returns. Examples of the former are the Multivariate GARCH (MGARCH) models while models fitted to Realized Covariance (RC) matrices are examples of the latter. A second option, strictly related to the RC matrices, is given by the identification of the frequency at which the intradaily returns are observed. A third option concerns the proper estimation method able to guarantee unbiased parameter estimates even for large (MGARCH) models.