Evaluation of GARCH Forecasting Performance Under Different Error Term Distributions

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Khajian, Hamideh | 2013

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 44198 (44)
University: Sharif University of Technology
Department: Industrial Engineering
Advisor(s): Zamani, Shiva
Abstract:
Volatility is the most important components in numerous finance applications. So, the methods of volatility forecast with reasonable accuracy require a deep attention.In this thesis with considering several distributions for error term, GARCH forecasting performance is evaluated on the intra- day data of "Foolad" stock returns by two loss functions of "MAE" and "HMAE". This evaluation is done in three forecast horizons, 1 day, 5 days and 20 days. Finally, the result of this study is as follows. GARCH (1, 1) forecast model with skewed t- student error distribution has the minimum value in the both loss functions for 1 day and 5 day forecast horizons. Also GARCH (1, 1) forecast model with t- student error distribution has the minimum value in the both loss functions for 20 day forecast horizon
Keywords:
Forecasting ; Volatility ; General Autoregressive Conditional Heteroskedastic (GARCH) ; Loss Function ; Error Distribution

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