Asymmetry dynamic volatility forecast evaluations using interday and intraday data

Chin Wen Cheong, Ng Sew Lai, Zaidi Isa, Abu Hassan Shaari Md Nor

Research output: Contribution to journalArticle

Abstract

The accuracy of financial time series forecasts often rely on the model precision and the availability of actual observations for forecast evaluations. This study aimed to tackle these issues in order to obtain a suitable asymmetric time-varying volatility model that outperformed in the forecast evaluations based on interday and intraday data. The model precision was examined based on the most appropriate time-varying volatility representation under the autoregressive conditional heteroscedascity framework. For forecast precision, the evaluations were conducted under three loss functions using the volatility proxies and realized volatility. The empirical studies were implemented on two major financial markets and the estimated results are applied in quantifying their market risks. Empirical results indicated that Zakoian model provided the best in-sample forecasts whereas DGE on the other hand indicated better out-of-sample forecasts. For the type of volatility proxy selection, the implementation of intraday data in the latent volatility indicated significant improvement in all the time horizon forecasts.

Original languageEnglish
Pages (from-to)1287-1299
Number of pages13
JournalSains Malaysiana
Volume41
Issue number10
Publication statusPublished - Oct 2012

Fingerprint

Volatility forecasts
Forecast evaluation
Intraday data
Asymmetry
Time-varying volatility
Financial markets
Volatility models
Empirical study
Financial time series
Loss function
Time horizon
Realized volatility
Market risk
Empirical results
Out-of-sample forecasting
Evaluation

Keywords

  • ARCH model
  • Dynamic volatility
  • Market risk
  • Realized volatility

ASJC Scopus subject areas

  • General

Cite this

Cheong, C. W., Lai, N. S., Isa, Z., & Md Nor, A. H. S. (2012). Asymmetry dynamic volatility forecast evaluations using interday and intraday data. Sains Malaysiana, 41(10), 1287-1299.

Asymmetry dynamic volatility forecast evaluations using interday and intraday data. / Cheong, Chin Wen; Lai, Ng Sew; Isa, Zaidi; Md Nor, Abu Hassan Shaari.

In: Sains Malaysiana, Vol. 41, No. 10, 10.2012, p. 1287-1299.

Research output: Contribution to journalArticle

Cheong, CW, Lai, NS, Isa, Z & Md Nor, AHS 2012, 'Asymmetry dynamic volatility forecast evaluations using interday and intraday data', Sains Malaysiana, vol. 41, no. 10, pp. 1287-1299.
Cheong, Chin Wen ; Lai, Ng Sew ; Isa, Zaidi ; Md Nor, Abu Hassan Shaari. / Asymmetry dynamic volatility forecast evaluations using interday and intraday data. In: Sains Malaysiana. 2012 ; Vol. 41, No. 10. pp. 1287-1299.
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