Direction-of-Change Forecasts for Asian Equity Markets Based on Conditional Variance, Skewness and Kurtosis Dynamics: Evidence from Hong Kong and Singapore
AbstractRecent theoretical work has revealed a direct connection between asset return volatility forecastability and asset return sign forecastability. This suggests that the pervasive volatility forecastability in equity returns could, via induced sign forecastability, be used to produce direction-ofchange forecasts useful for market timing. We attempt to do so in the context of two key Asian equity markets, with some success, as assessed by formal probability forecast scoring rules such as the Brier score. An important ingredient is our conditioning not only on conditional variance information, but also conditional skewness and kurtosis information, when forming direction-of-change forecasts.
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Bibliographic InfoPaper provided by Singapore Management University, School of Economics in its series Working Papers with number 02-2005.
Length: 26 pages
Date of creation: Jul 2004
Date of revision: Jan 2005
Publication status: Published in SMU Economics and Statistics Working Paper Series
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-30 (All new papers)
- NEP-ECM-2006-09-30 (Econometrics)
- NEP-ETS-2006-09-30 (Econometric Time Series)
- NEP-FMK-2006-09-30 (Financial Markets)
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