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Assessing Volatility Forecasting Models: Why GARCH Models Take the Lead

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Author Info

  • Matei, Marius

    ()
    (Ph.D. Student at ESADE Business School, Department of Finance, Barcelona and at National Institute of Economic Research, Romanian Academy, Bucharest)

Abstract

The paper provides a critical assessment of the main forecasting techniques and an evaluation of the superiority of the more advanced and complex models. Ultimately, its scope is to offer support for the rationale behind of an idea: GARCH is the most appropriate model to use when one has to evaluate the volatility of the returns of groups of stocks with large amounts (thousands) of observations. The appropriateness of the model is seen through a unidirectional perspective of the quality of volatility forecast provided by GARCH when compared to any other alternative model, without considering any cost component.

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File URL: http://www.ipe.ro/rjef/rjef4_09/rjef4_09_3.pdf
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Bibliographic Info

Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): (2009)
Issue (Month): 4 (December)
Pages: 42-65

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Handle: RePEc:rjr:romjef:v::y:2009:i:4:p:42-65

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Related research

Keywords: volatility; GARCH; forecast; correlation; risk; heteroskedasticity;

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Cited by:
  1. Lin, Xiaoqiang & Fei, Fangyu, 2013. "Long memory revisit in Chinese stock markets: Based on GARCH-class models and multiscale analysis," Economic Modelling, Elsevier, vol. 31(C), pages 265-275.
  2. Matei, Marius, 2010. "Risk analysis in the evaluation of the international investment opportunities. Advances in modelling and forecasting volatility for risk assessment purposes," Working Papers of Institute for Economic Forecasting 100201, Institute for Economic Forecasting.

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