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Predictability of Return Volatility Across Different Emerging Capital Markets: Evidence from Asia

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  • Thushari N. Vidanage
  • Fabrizio Carmignani
  • Tarlok Singh

Abstract

The importance of return volatility forecasts in policy formation and investment decision-making in emerging countries is growing considerably. However, from an operational perspective, there is no consensus in the literature on which econometric model has the best forecasting performance. To shed new light on this issue, this article compares forecasting models for a selected group of emerging Asian economies: India, Malaysia, Pakistan, Sri Lanka, Singapore and Thailand. Model’s performance is tested using both in-sample and out-of-sample forecasting methods. It is found that a relatively simple asymmetric EGARCH model clearly outperforms other models. JEL Classification: G12, G17

Suggested Citation

  • Thushari N. Vidanage & Fabrizio Carmignani & Tarlok Singh, 2017. "Predictability of Return Volatility Across Different Emerging Capital Markets: Evidence from Asia," South Asian Journal of Macroeconomics and Public Finance, , vol. 6(2), pages 157-177, December.
    • Handle: RePEc:sae:smppub:v:6:y:2017:i:2:p:157-177
    DOI: 10.1177/2277978717727172
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    More about this item

    Keywords

    Emerging markets; GARCH models; stock returns; volatility forecasting; out-of-sample forecasting;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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