A Forecast Comparison of Financial Volatility Models: GARCH (1,1) is not Enough
AbstractAsset allocation and risk calculations depend largely on volatile models. The parameters of the volatility models are estimated using either the Maximum Likelihood (ML) or the Quasi-Maximum Likelihood (QML). By comparing the out-of-sample forecasting performance of 68 ARCH-type models using inter-daily data on the peso-dollar exchange rate, this study shows that it is important to correctly specify the distribution of the asset returns and not only focus on the specification of the volatility. The forecasts are compared to the Parkinson Range, an alternative to the Realized Volatility.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 21028.
Date of creation: 2004
Date of revision:
Publication status: Published in The Philippine Statistician 1-4.53(2004): pp. 1-10
Volatility; ARCH; Parkinson Range;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
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