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Predictive ability of asymmetric volatility models at medium-term horizons

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  • Turgut Kısınbay

Abstract

Using realized volatility to estimate conditional variance of financial returns, we compare forecasts of volatility from linear GARCH models with asymmetric ones. We consider horizons extending to 30 days. Forecasts are compared using three different evaluation tests. With data from an equity index and two foreign exchange returns, we show that asymmetric models provide statistically significant forecast improvements upon the GARCH model for two of the datasets and improve forecasts for all datasets by means of forecasts combinations. These results extend to about 10 days in the future, beyond which the forecasts are statistically inseparable from each other.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 42 (2010)
Issue (Month): 30 ()
Pages: 3813-3829

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Handle: RePEc:taf:applec:v:42:y:2010:i:30:p:3813-3829

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Cited by:
  1. N. Antonakakis & J. Darby, 2013. "Forecasting volatility in developing countries' nominal exchange returns," Applied Financial Economics, Taylor & Francis Journals, vol. 23(21), pages 1675-1691, November.
  2. Bednarik, Radek, 2008. "Analýza volatility devizových kurzů vybraných ekonomik
    [The Analysis of Volatility of Selected Countries' Exchange Rates]
    ," MPRA Paper 15046, University Library of Munich, Germany.

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