Forecast Evaluation of Explanatory Models of Financial Return Variability
AbstractA practice that has become widespread is that of comparing forecasts of financial return variability obtained from discrete time models against high frequency estimates based on continuous time theory. In explanatory financial return variability modelling this raises several methodological and practical issues, which suggests an alternative framework is needed. The contribution of this study is twofold. First, the finite sample properties of operational and practical procedures for the forecast evaluation of explanatory discrete time models of financial return variability are studied. Second, with basis in the simulation results a simple framework is proposed and illustrated. --
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2008-18.
Date of creation: 2008
Date of revision:
Return variability forecasting; financial volatility; explanatory modelling;
Find related papers by JEL classification:
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
- F31 - International Economics - - International Finance - - - Foreign Exchange
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