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- Title
Optimal Multi-Step-Ahead Prediction of ARCH/GARCH Models and NoVaS Transformation.
- Authors
Chen, Jie; Politis, Dimitris N.
- Abstract
This paper gives a computer-intensive approach to multi-step-ahead prediction of volatility in financial returns series under an ARCH/GARCH model and also under a model-free setting, namely employing the NoVaS transformation. Our model-based approach only assumes i. i. d innovations without requiring knowledge/assumption of the error distribution and is computationally straightforward. The model-free approach is formally quite similar, albeit a GARCH model is not assumed. We conducted a number of simulations to show that the proposed approach works well for both point prediction (under L 1 and/or L 2 measures) and prediction intervals that were constructed using bootstrapping. The performance of GARCH models and the model-free approach for multi-step ahead prediction was also compared under different data generating processes.
- Subjects
GARCH model; SIMULATION methods &; models; MONTE Carlo method
- Publication
Econometrics (2225-1146), 2019, Vol 7, Issue 3, p34
- ISSN
2225-1146
- Publication type
Article
- DOI
10.3390/econometrics7030034