Evaluating multivariate volatility forecasts
AbstractThe performance of techniques for evaluating univariate volatility forecasts are well understood. In the multivariate setting however, the efficacy of the evaluation techniques is not developed. Multivariate forecasts are often evaluated within an economic application such as portfolio optimisation context. This paper aims to evaluate the efficacy of such techniques, along with traditional statistical based methods. It is found that utility based methods perform poorly in terms of identifying optimal forecasts whereas statistical methods are more effective.
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Bibliographic InfoPaper provided by National Centre for Econometric Research in its series NCER Working Paper Series with number 41.
Date of creation: 23 Feb 2009
Date of revision: 25 Nov 2009
Multivariate volatility; forecasts; forecast evaluation; Model confidence set;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- G00 - Financial Economics - - General - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-03-22 (All new papers)
- NEP-ECM-2009-03-22 (Econometrics)
- NEP-ETS-2009-03-22 (Econometric Time Series)
- NEP-FOR-2009-03-22 (Forecasting)
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