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Modeling and Forecasting the Volatility of Eastern European Emerging Markets

Author

Listed:
  • Kang, Sang Hoon

    (Gyeongsang National University)

  • Yoon, Seong-Min

    (Pusan National University)

Abstract

This study has attempted to seek a volatility forecasting model that can reflect sufficiently the long memory characteristic in the volatility of four Eastern European emerging stock markets, naThis study has attempted to seek a volatility forecasting model that can reflect sufficiently the long memory characteristic in the volatility of four Eastern European emerging stock markets, namely, Hungary, Poland, Russia, and Slovakia. From the results of our empirical analysis, we found that the FIGARCH model is better equipped to capture the long memory property in the volatility of these markets than the GARCH and IGARCH models. More importantly, the FIGARCH model is found to provide superior performance in one-day-ahead volatility forecasts. Thus, this study recommends researchers, portfolio managers, and traders to use the long memory FIGARCH model in analyzing and forecasting the volatility dynamics of Eastern European emerging markets.

Suggested Citation

  • Kang, Sang Hoon & Yoon, Seong-Min, 2009. "Modeling and Forecasting the Volatility of Eastern European Emerging Markets," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 13(1), pages 113-132, June.
    • Handle: RePEc:ris:eaerev:0126
    DOI: 10.11644/KIEP.JEAI.2009.13.1.198
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    More about this item

    Keywords

    Eastern European; Emerging Market; Volatility; Long Memory; FIGARCH; DM Test;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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