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General to specific modelling of exchange rate volatility: a forecast evaluation

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  • BAUWENS, Luc
  • SUCARRAT, Genaro

Abstract

The general-to-specific (GETS) approach to modelling is widely employed in the modelling of economic series, but less so in financial volatility modelling due to computational complexity when many explanatory variables are involved. This study proposed a simple way of avoiding this problem and undertakes an out-of-sample forecast evaluation of the methodology applied to the modelling of weekly exchange rate volatility. Our findings suggest that GETS specifications are especially valuable in conditional forecasting, since the specification that employs actual values on the uncertain information performs particularly well

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2006021.

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Date of creation: 00 Mar 2006
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Handle: RePEc:cor:louvco:2006021

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Keywords: exchange rate volatility; general to specific; forecasting;

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Cited by:
  1. Chortareas, Georgios & Jiang, Ying & Nankervis, John. C., 2011. "Forecasting exchange rate volatility using high-frequency data: Is the euro different?," International Journal of Forecasting, Elsevier, vol. 27(4), pages 1089-1107, October.
  2. Cairns, Andrew J.G. & Blake, David & Dowd, Kevin & Coughlan, Guy D. & Epstein, David & Khalaf-Allah, Marwa, 2011. "Mortality density forecasts: An analysis of six stochastic mortality models," Insurance: Mathematics and Economics, Elsevier, vol. 48(3), pages 355-367, May.
  3. Tennant, David, 2011. "Why do people risk exposure to Ponzi schemes? Econometric evidence from Jamaica," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(3), pages 328-346, July.

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