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Modeling and Forecasting Volatility of the Malaysian and the Singaporean stock indices using Asymmetric GARCH models and Non-normal Densities

Author

Listed:
  • Ahmed Shamiri

    (University Kebangsaan Malaysia)

  • Abu Hassan

    (University Kebangsaan Malaysia)

Abstract

This paper examines and estimate the three GARCH(1,1) models (GARCH, EGARCH and GJR-GARCH) using the daily price data. Two Asian stock indices KLCI and STI are studied using daily data over a 14-years period. The competing Models include GARCH, EGARCH and GJR-GARCH used with three different distributions, Gaussian normal, Student-t, Generalized Error Distribution. The estimation results show that the forecasting performance of asymmetric GARCH Models (GJR-GARCH and EGARCH), especially when fat-tailed asymmetric densities are taken into account in the conditional volatility, is better than symmetric GARCH. Moreover, its found that the AR(1)-GJR model provide the best out-of- sample forecast for the Malaysian stock market, while AR(1)-EGARCH provide a better estimation for the Singaporean stock market.

Suggested Citation

  • Ahmed Shamiri & Abu Hassan, 2005. "Modeling and Forecasting Volatility of the Malaysian and the Singaporean stock indices using Asymmetric GARCH models and Non-normal Densities," Econometrics 0509015, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpem:0509015
    Note: Type of Document - pdf; pages: 25
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    ARCH-Models; Asymmetry; Stock market indices and volatility modeling; SAS/ETS software.;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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