Abstract
This paper offers a new estimator of volatility's common component of a return. This estimator is obtained by applying a procedure based on the generalized dynamic factor model to the observations on squared returns. A Monte–Carlo study is conducted to evaluate the performance of the proposed estimator.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1 Surveys on the properties of ARSV models are given by [Citation3–5]
2 See [Citation1] for technical details.