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A range-based GARCH model for forecasting financial volatility

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Author Info

  • Dennis S. Mapa

    ()
    (University of the Philippines School of Statistics, University of the Philippines Diliman, Quezon City)

Abstract

A new variant of the ARCH class of models for forecasting the conditional variance, to be called the Generalized AutoRegressive Conditional Heteroskedasticity Parkinson Range (GARCH-PARK-R) model, is proposed. The GARCH-PARK-R model, utilizing the extreme values, is a good alternative to the “realized volatility” model which requires a large amount of intra-daily data that remain relatively costly and are not readily available. The estimates of the GARCH-PARK-R model are derived using the Quasi-Maximum Likelihood Estimation (QMLE). The results suggest that the GARCHPARK- R model is a good middle ground between intra-daily models, such as the realized volatility, and inter-daily models, such as the ARCH class. The forecasting performance of the models is evaluated using the daily Philippine Peso-U.S. Dollar exchange rate from January 1997 to December 2003.

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File URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/22/567
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Bibliographic Info

Article provided by University of the Philippines School of Economics and Philippine Economic Society in its journal Philippine Review of Economics.

Volume (Year): 40 (2003)
Issue (Month): 2 (December)
Pages: 73-90

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Handle: RePEc:phs:prejrn:v:40:y:2003:i:2:p:73-90

Contact details of provider:
Postal: Diliman, Quezon City 1101
Phone: 927-9686
Web page: http://www.econ.upd.edu.ph/
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Related research

Keywords: Volatility; GARCH-PARK-R; QMLE;

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Cited by:
  1. Nikkin L. Beronilla & Dennis S. Mapa, 2008. "Range-based models in estimating value-at-risk (VaR)," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 45(2), pages 87-99, December.

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