Forecasting exchange rate volatility using conditional variance models selected by information criteria

Brooks, C. ORCID: https://orcid.org/0000-0002-2668-1153 and Burke, S. (1998) Forecasting exchange rate volatility using conditional variance models selected by information criteria. Economics Letters, 61 (3). pp. 273-278. ISSN 0165-1765 doi: 10.1016/S0165-1765(98)00178-5

Abstract/Summary

This paper uses appropriately modified information criteria to select models from the GARCH family, which are subsequently used for predicting US dollar exchange rate return volatility. The out of sample forecast accuracy of models chosen in this manner compares favourably on mean absolute error grounds, although less favourably on mean squared error grounds, with those generated by the commonly used GARCH(1, 1) model. An examination of the orders of models selected by the criteria reveals that (1, 1) models are typically selected less than 20% of the time.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/35984
Identification Number/DOI	10.1016/S0165-1765(98)00178-5
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Publisher	Elsevier
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