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Modeling and Forecasting Volatility of the Malaysian and the Singaporean stock indices using Asymmetric GARCH models and Non-normal Densities

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Author Info
Ahmed Shamiri (University Kebangsaan Malaysia)
Abu Hassan (University Kebangsaan Malaysia)

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Abstract

This paper examines and estimate the three GARCH(1,1) models (GARCH, EGARCH and GJR-GARCH) using the daily price data. Two Asian stock indices KLCI and STI are studied using daily data over a 14-years period. The competing Models include GARCH, EGARCH and GJR-GARCH used with three different distributions, Gaussian normal, Student-t, Generalized Error Distribution. The estimation results show that the forecasting performance of asymmetric GARCH Models (GJR-GARCH and EGARCH), especially when fat-tailed asymmetric densities are taken into account in the conditional volatility, is better than symmetric GARCH. Moreover, its found that the AR(1)-GJR model provide the best out-of- sample forecast for the Malaysian stock market, while AR(1)-EGARCH provide a better estimation for the Singaporean stock market.

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Publisher Info
Paper provided by EconWPA in its series Econometrics with number 0509015.

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Length: 25 pages
Date of creation: 08 Sep 2005
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Handle: RePEc:wpa:wuwpem:0509015

Note: Type of Document - pdf; pages: 25
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Web page: http://129.3.20.41

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Related research
Keywords: ARCH-Models; Asymmetry; Stock market indices and volatility modeling; SAS/ETS software.;

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Find related papers by JEL classification:
C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General
C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
C5 - Mathematical and Quantitative Methods - - Econometric Modeling
C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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    Other versions:
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