IDEAS home Printed from https://ideas.repec.org/a/taf/eurjfi/v30y2024i6p575-596.html
   My bibliography  Save this article

A reality check on the GARCH-MIDAS volatility models

Author

Listed:
  • Nader Virk
  • Farrukh Javed
  • Basel Awartani
  • Stuart Hyde

Abstract

We employ a battery of model evaluation tests for a broad set of GARCH-MIDAS models and account for data snooping bias. We document that inferences based on standard tests for GM variance components can be misleading. Our data mining free results show that the gain of macro-variables in forecasting total (long-run) variance by GM models is overstated (understated). Estimation of different components of volatility is crucial for designing differentiated investing strategies, risk management plans and pricing derivative securities. Therefore, researchers and practitioners should be wary of data-mining bias, which may contaminate a forecast that may appear statistically validated using robust evaluation tests.

Suggested Citation

  • Nader Virk & Farrukh Javed & Basel Awartani & Stuart Hyde, 2024. "A reality check on the GARCH-MIDAS volatility models," The European Journal of Finance, Taylor & Francis Journals, vol. 30(6), pages 575-596, April.
    • Handle: RePEc:taf:eurjfi:v:30:y:2024:i:6:p:575-596
    DOI: 10.1080/1351847X.2023.2217220
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/1351847X.2023.2217220
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/1351847X.2023.2217220?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:eurjfi:v:30:y:2024:i:6:p:575-596. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/REJF20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.