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Forecasting High-Frequency Financial Data Volatility Via Nonparametric Algorithms: Evidence From Taiwan'S Financial Markets

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Author Info

  • WO-CHIANG LEE

    ()
    (Department of Finance and Banking, Aletheia University, 32, Chen Li Street, Tamsui, Taipei County, 251, Taiwan, ROC)

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    Abstract

    This paper uses two computational intelligence algorithms, namely, artificial neural networks (ANN) and genetic programming (GP), for forecasting the volatility of high-frequency TAIEX financial data with four different horizons and compares the out-sample forecasting performance with the GARCH(1,1), EGRACH(1,1) and GJR-GARCH(1,1) models. Based on intraday integrated volatility, the mean squared error (MSE), mean absolute error (MAE), mean absolute percentage error (MAPE), Theil's U and the VaR backtest are used as performance indexes. Our empirical results reveal that the GP and ANN perform reasonably well in forecasting out-sample volatility compared to other parametric volatility forecasting models for most of the performance indexes. Our results also suggest that nonparametric computational intelligence algorithms are powerful for modeling the volatility of high-frequency intraday financial data.

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    Bibliographic Info

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal New Mathematics and Natural Computation.

    Volume (Year): 02 (2006)
    Issue (Month): 03 ()
    Pages: 345-359

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    Handle: RePEc:wsi:nmncxx:v:02:y:2006:i:03:p:345-359

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    Related research

    Keywords: Integrated volatility; genetic programming; artificial neural networks;

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