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Forecasting stock market volatility with non-linear GARCH models: a case for China


  • Weixian Wei


This paper studies the performance of the GARCH model and two of its non-linear modifications to forecast China's weekly stock market volatility. The models are the Quadratic GARCH and the Glosten, Jagannathan and Runkle models which have been proposed to describe the often observed negative skewness in stock market indices. It is found that the QGARCH model is best when the estimation sample does not contain extreme observations such as the stock market crash, and that the GJR model cannot be recommended for forecasting.

Suggested Citation

  • Weixian Wei, 2002. "Forecasting stock market volatility with non-linear GARCH models: a case for China," Applied Economics Letters, Taylor & Francis Journals, vol. 9(3), pages 163-166.
  • Handle: RePEc:taf:apeclt:v:9:y:2002:i:3:p:163-166 DOI: 10.1080/13504850110053266

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    References listed on IDEAS

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    Cited by:

    1. Liu, Hung-Chun & Chiang, Shu-Mei & Cheng, Nick Ying-Pin, 2012. "Forecasting the volatility of S&P depositary receipts using GARCH-type models under intraday range-based and return-based proxy measures," International Review of Economics & Finance, Elsevier, vol. 22(1), pages 78-91.
    2. C. James Hueng, 2006. "Short-sales constraints and stock return asymmetry: evidence from the Chinese stock markets," Applied Financial Economics, Taylor & Francis Journals, vol. 16(10), pages 707-716.
    3. Yasemin Ulu, 2005. "Out-of-sample forecasting performance of the QGARCH model," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 1(6), pages 387-392, November.
    4. Olmedo,E. & Velasco, F. & Valderas, J.M., 2007. "Caracterización no lineal y predicción no paramétrica en el IBEX35/Nonlinear Characterization and Predictions of IBEX 35," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 25, pages 815-842, Diciembre.
    5. Stavros Degiannakis & Alexandra Livada & Epaminondas Panas, 2008. "Rolling-sampled parameters of ARCH and Levy-stable models," Applied Economics, Taylor & Francis Journals, vol. 40(23), pages 3051-3067.
    6. Hou, Ai Jun, 2013. "Asymmetry effects of shocks in Chinese stock markets volatility: A generalized additive nonparametric approach," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 12-32.

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