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Volatility Forecasting in the Hang Seng index using the GARCH Approach


Reference:

Liu, W. and Morley, B., 2009. Volatility Forecasting in the Hang Seng index using the GARCH Approach. Asia-Pacific Financial Markets, 16 (1), pp. 51-63.

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Official URL:

http://dx.doi.org/10.1007/s10690-009-9086-4

Abstract

The aim of this paper is to add to the literature on volatility forecasting using data from the Hong Kong stock market to determine if forecasts from GARCH based models can outperform simple historical averaging models. Overall, unlike previous studies we find that the GARCH models with non-Normal distributions show a robust volatility forecasting performance in comparison to the historical models. The results indicate that although not all models outperform simple historical averaging, the EGARCH based models, with non-normal conditional volatility, tend to produce more accurate out-of-sample forecasts using both standard measures of forecast accuracy and financial loss functions. In addition we test for asymmetric adjustment in the Hang Seng, finding strong evidence of asymmetries due to the domination of financial and property firms in this market.

Details

Item Type Articles
CreatorsLiu, W.and Morley, B.
DOI10.1007/s10690-009-9086-4
DepartmentsFaculty of Humanities & Social Sciences > Social & Policy Sciences
Faculty of Humanities & Social Sciences > Economics
RefereedYes
StatusPublished
ID Code14620

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