A systematic modelling strategy for futures markets volatility
Over the past decade, econometric modelling of the volatility clustering phenomenon has been a very active area of research and several new approaches have been proposed and tested. Given the ever greater role of futures markets in risk management in modern economic theory, it seems advisable to formulate a systematic methodology for modelling these financial tools. In this paper, using soybean futures data, a systematic modelling strategy is proposed that takes into account the various aspects that should be incorporated in a bona fide volatility model. Several volatility models are analysed and compared in terms of their in-sample fit adequacy and predictive ability. Special attention is devoted to the asymmetric effect that the arrival of news may have on volatility. The proposed approach is sufficiently broad to be applied to other futures markets.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 16 (2006)
Issue (Month): 11 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAFE20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAFE20|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fornari, Fabio & Mele, Antonio, 1997.
"Sign- and Volatility-Switching ARCH Models: Theory and Applications to International Stock Markets,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 12(1), pages 49-65, Jan.-Feb..
- Fornari, F. & Mele, A., 1995. "Sign- and Volatility -Switching ARCH Models: Theory and Applications to International Stock Markets," Papers 251, Banca Italia - Servizio di Studi.
- Pagan, Adrian R. & Schwert, G. William, 1990.
"Alternative models for conditional stock volatility,"
Journal of Econometrics,
Elsevier, vol. 45(1-2), pages 267-290.
- Pagan, A.R. & Schwert, G.W., 1989. "Alternative Models For Conditional Stock Volatility," Papers 89-02, Rochester, Business - General.
- Adrian R. Pagan & G. William Schwert, 1989. "Alternative Models For Conditional Stock Volatility," NBER Working Papers 2955, National Bureau of Economic Research, Inc.
- Bollerslev, Tim, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
Journal of Econometrics,
Elsevier, vol. 31(3), pages 307-327, April.
- Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Mohammad Najand, 2002. "Forecasting Stock Index Futures Price Volatility: Linear vs. Nonlinear Models," The Financial Review, Eastern Finance Association, vol. 37(1), pages 93-104, 02.
- Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993.
" On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks,"
Journal of Finance,
American Finance Association, vol. 48(5), pages 1779-1801, December.
- Lawrence R. Glosten & Ravi Jagannathan & David E. Runkle, 1993. "On the relation between the expected value and the volatility of the nominal excess return on stocks," Staff Report 157, Federal Reserve Bank of Minneapolis.
- Sentana,E., 1995.
"Quadratic Arch Models,"
9517, Centro de Estudios Monetarios Y Financieros-.
- Sunil Poshakwale & Victor Murinde, 2001. "Modelling the volatility in East European emerging stock markets: evidence on Hungary and Poland," Applied Financial Economics, Taylor & Francis Journals, vol. 11(4), pages 445-456.
- Wooldridge, Jeffrey M., 1990. "A Unified Approach to Robust, Regression-Based Specification Tests," Econometric Theory, Cambridge University Press, vol. 6(01), pages 17-43, March.
- Andersen, Torben G. & Bollerslev, Tim & Cai, Jun, 2000. "Intraday and interday volatility in the Japanese stock market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 10(2), pages 107-130, June.
- Geert Bekaert & Guojun Wu, 1997.
"Asymmetric Volatility and Risk in Equity Markets,"
NBER Working Papers
6022, National Bureau of Economic Research, Inc.
- Fornari, Fabio & Mele, Antonio, 1996. "Modeling the changing asymmetry of conditional variances," Economics Letters, Elsevier, vol. 50(2), pages 197-203, February.
- Peter C.B. Phillips & Pierre Perron, 1986.
"Testing for a Unit Root in Time Series Regression,"
Cowles Foundation Discussion Papers
795R, Cowles Foundation for Research in Economics, Yale University, revised Sep 1987.
- Tom Doan, . "PPUNIT: RATS procedure to perform Phillips-Perron Unit Root test," Statistical Software Components RTS00160, Boston College Department of Economics.
- Phillips, P.C.B., 1986. "Testing for a Unit Root in Time Series Regression," Cahiers de recherche 8633, Universite de Montreal, Departement de sciences economiques.
- Jun Yu, 2002.
"Forecasting volatility in the New Zealand stock market,"
Applied Financial Economics,
Taylor & Francis Journals, vol. 12(3), pages 193-202.
- Yu, Jun, 1999. "Forecasting Volatility in the New Zealand Stock Market," Working Papers 175, Department of Economics, The University of Auckland.
- Blair, Bevan J. & Poon, Ser-Huang & Taylor, Stephen J., 2001. "Forecasting S&P 100 volatility: the incremental information content of implied volatilities and high-frequency index returns," Journal of Econometrics, Elsevier, vol. 105(1), pages 5-26, November.
- Tim Bollerslev & Jeffrey M. Wooldridge, 1988. "Quasi-Maximum Likelihood Estimation of Dynamic Models with Time-Varying Covariances," Working papers 505, Massachusetts Institute of Technology (MIT), Department of Economics.
- Michael Hu & Christine Jiang & Christos Tsoukalas, 2004. "The volatility impact of the European monetary system on member and non-member currencies," Applied Financial Economics, Taylor & Francis Journals, vol. 14(5), pages 313-325.
- Blair, Bevan J. & Poon, Ser-Huang & Taylor, Stephen J., 2001. "Modelling S&P 100 volatility: The information content of stock returns," Journal of Banking & Finance, Elsevier, vol. 25(9), pages 1665-1679, September.
- Christine Jiang & Thomas Chiang, 2000. "Do foreign exchange risk premiums relate to the volatility in the foreign exchange and equity markets?," Applied Financial Economics, Taylor & Francis Journals, vol. 10(1), pages 95-104.
- R. Golinelli & R. Orsi, 2001. "Hungary and Poland," Working Papers 424, Dipartimento Scienze Economiche, Universita' di Bologna.
- Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
- Torben G. Andersen & Tim Bollerslev, 1998. "Deutsche Mark-Dollar Volatility: Intraday Activity Patterns, Macroeconomic Announcements, and Longer Run Dependencies," Journal of Finance, American Finance Association, vol. 53(1), pages 219-265, 02.
- David McMillan & Alan Speight, 2003. "Asymmetric volatility dynamics in high frequency FTSE-100 stock index futures," Applied Financial Economics, Taylor & Francis Journals, vol. 13(8), pages 599-607.
When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:16:y:2006:i:11:p:819-833. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.