Forecasting Stock Market Volatility: A Forecast Combination Approach
AbstractRecently, with the development of financial markets and due to the importance of these markets and their close relationship with other macroeconomic variables, using advanced mathematical models with complicated structures for forecasting these markets has become very popular. Besides, neural network models have gained a special position compared to other advanced models due to their high accuracy in forecasting different variables. Therefore, the main purpose of this study was to forecast the volatilities of TSE index by regressive models with long memory feature, feed forward neural network and hybrid models (based on forecast combination approach) using daily data. The results were indicative of the fact that based on the criteria for assessing forecasting error, i.e., MSE and RMSE, although forecasting errors of the feed forward neural network model were less than ARFIMA-FIGARCH model, the accuracy of the hybrid model of neural network and best GARCH was higher than each one of these models.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 46786.
Date of creation: 15 Mar 2013
Date of revision:
Stock Return; Long Memory; Neural Network; Hybrid Models.;
Find related papers by JEL classification:
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-05-11 (All new papers)
- NEP-CMP-2013-05-11 (Computational Economics)
- NEP-ETS-2013-05-11 (Econometric Time Series)
- NEP-FMK-2013-05-11 (Financial Markets)
- NEP-FOR-2013-05-11 (Forecasting)
- NEP-ORE-2013-05-11 (Operations Research)
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