English, Article, Journal or magazine article edition: General to Specific Modelling of Exchange Rate Volatility : a Forecast Evaluation Luc Bauwens; Genaro Sucarrat

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Bookmark: http://trove.nla.gov.au/version/178165
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • General to specific modelling of exchange rate volatility : a forecast evaluation
Author
  • Luc Bauwens
  • Genaro Sucarrat
Physical Description
  • preprint
Notes
  • The general-to-specific (GETS) approach to modelling is widely employed in the modelling of economic series, but less so in financial volatility modelling due to computational complexity when many explanatory variables are involved. This study proposes a simple way of avoiding this problem and undertakes an out-of-sample forecast evaluation of the methodology applied to the modelling of weekly exchange rate volatility. Our findings suggest that GETS specifications are especially valuable in conditional forecasting, since the specification that employs actual values on the uncertain information performs particularly well.
  • RePEc:ctl:louvec:2006013
  • The general-to-specific (GETS) methodology is widely employed in the modelling of economic series, but less so in financial volatility modelling due to computational complexity when many explanatory variables are involved. This study proposes a simple way of avoiding this problem when the conditional mean can appropriately be restricted to zero, and undertakes an out-of-sample forecast evaluation of the methodology applied to the modelling of weekly exchange rate volatility. Our findings suggest that GETS specifications perform comparatively well in both ex post and ex ante forecasting as long as sufficient care is taken with respect to functional form and with respect to how the conditioning information is used. Also, our forecast comparison provides an example of a discrete time explanatory model being more accurate than realised volatility ex post in 1 step forecasting.
  • Exchange rate volatility, General to specific, Forecasting
  • RePEc:cte:werepe:we081810
Language
  • English
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