The Importance of the Macroeconomic Variables in Forecasting Stock Return Variance: A GARCH-MIDAS Approach
This paper applies the GARCH-MIDAS (mixed data sampling) model to examine whether information contained in macroeconomic variables can help to predict short-term and long-term components of the return variance. A principal component analysis is used to incorporate the information contained in different variables. Our results show that including low-frequency macroeconomic information in the GARCH-