Forecasting daily exchange rate volatility using intraday returns

This study investigates whether intraday returns contain important informat ion for forecasting daily volatility. Whereas in the existing literature vo latility models for daily returns are improved by including intraday inform ation such as the daily high and low, volume, the number of trades, and int raday returns, here the volatility of intraday returns is explicitly modell ed. Daily volatility forecasts are constructed from multiple volatility for ecasts for intraday intervals. It is shown for the DEM/USD and the YEN/USD exchange rates that this results in superior forecasts for daily volatility . (C) 2001 Elsevier Science Ltd. All rights reserved. JEL classification: G 15.