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A Range-Based GARCH Model for Forecasting Volatility

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  • Mapa, Dennis S.

Abstract

A new variant of the ARCH class of models for forecasting the conditional variance, to be called the Generalized AutoRegressive Conditional Heteroskedasticity Parkinson Range (GARCH-PARK-R) Model, is proposed. The GARCH-PARK-R model, utilizing the extreme values, is a good alternative to the Realized Volatility that requires a large amount of intra-daily data, which remain relatively costly and are not readily available. The estimates of the GARCH-PARK-R model are derived using the Quasi-Maximum Likelihood Estimation (QMLE). The results suggest that the GARCH-PARK-R model is a good middle ground between intra-daily models, such as the Realized Volatility and inter-daily models, such as the ARCH class. The forecasting performance of the models is evaluated using the daily Philippine Peso-U.S. Dollar exchange rate from January 1997 to December 2003.

Suggested Citation

  • Mapa, Dennis S., 2003. "A Range-Based GARCH Model for Forecasting Volatility," MPRA Paper 21323, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:21323
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    References listed on IDEAS

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    Cited by:

    1. Petropoulos, Fotios & Apiletti, Daniele & Assimakopoulos, Vassilios & Babai, Mohamed Zied & Barrow, Devon K. & Ben Taieb, Souhaib & Bergmeir, Christoph & Bessa, Ricardo J. & Bijak, Jakub & Boylan, Joh, 2022. "Forecasting: theory and practice," International Journal of Forecasting, Elsevier, vol. 38(3), pages 705-871.
      • Fotios Petropoulos & Daniele Apiletti & Vassilios Assimakopoulos & Mohamed Zied Babai & Devon K. Barrow & Souhaib Ben Taieb & Christoph Bergmeir & Ricardo J. Bessa & Jakub Bijak & John E. Boylan & Jet, 2020. "Forecasting: theory and practice," Papers 2012.03854, arXiv.org, revised Jan 2022.
    2. Tomasz Skoczylas, 2014. "Modeling volatility with Range-based Heterogeneous Autoregressive Conditional Heteroskedasticity model," Working Papers 2014-06, Faculty of Economic Sciences, University of Warsaw.
    3. Nikkin L. Beronilla & Dennis S. Mapa, 2008. "Range-based models in estimating value-at-risk (VaR)," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 45(2), pages 87-99, December.
    4. Piotr Fiszeder, 2018. "Low and high prices can improve covariance forecasts: The evidence based on currency rates," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 37(6), pages 641-649, September.
    5. Tomasz Skoczylas, 2013. "Modelowanie i prognozowanie zmienności przy użyciu modeli opartych o zakres wahań," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 35.
    6. Marcin Fałdziński & Piotr Fiszeder & Witold Orzeszko, 2020. "Forecasting Volatility of Energy Commodities: Comparison of GARCH Models with Support Vector Regression," Energies, MDPI, vol. 14(1), pages 1-18, December.

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    More about this item

    Keywords

    Volatility; Parkinson Range; GARCH-PARK-R; QMLE;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics

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