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The Predictive Ability of Several Models of Exchange Rate Volatility

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  • Kenneth D. West
  • Dongchul Cho

Abstract

We compare the out-of-sample forecasting performance of univariate homoskedastic, GARCH, autoregressive and nonparametric models for conditional variances, using five bilateral weekly exchange rates for the dollar, 1973-1989. For a one week horizon, GARCH models tend to make slightly more accurate forecasts. For longer horizons, it is difficult to find grounds for choosing between the various models. None of the models perform well in a conventional test of forecast efficiency.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0152.

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Date of creation: Jan 1994
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Publication status: published as Journal of Econometrics, vol. 69, (1995), pp. 367-391.
Handle: RePEc:nbr:nberte:0152

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