A MIDAS approach to modeling first and second moment dynamics (Q726588)

In this paper the authors generalize the conventional regression specification to account for MIDAS effects in the votality equation. The Bayesian modeling approach offers several advantages in this approach, and it is discussed how to generate draws from the predictive density using Gibbs sampling methods. Empirical applications are considered and different forecast combination schemes are covered in this paper. Results observed suggest that model combination schemes assign weight to MIDAS-in-votality models and produce consistent gains in out-of-sample predictive performance.