Importance of macroeconomic variables for variance prediction: 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 various variables. Our results show that including low-frequency macroeconomic information in the GARCH-MI