We estimate the dynamic daily dependence between assets by applying the SCOMDY model (Chen and Fan (2006)) on intraday data. Using tick data of three stock returns the period before and during the credit crisis, we find that our dependence estimator better captures the steep increase in dependence during the onset of the crisis as compared to other commonly used time-varying copula methods. Like other high-frequency estimators, we find that the dependence estimator exhibits long memory and forecast it using a HAR model. We show that for out-of-sample forecasts, our dependence estimator performs better than the constant estimator and other commonly used time-varying copula dependence estimators.
- Intraday Dependence, High Frequency Data, Copula, Time-Varying Dependence, Value-at-Risk