Comparing the accuracy of density forecasts from competing GARCH models

Abu Hassan Shaari Md Nor, Ahmad Shamiri, Zaidi Isa

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

In this research we introduce an analyzing procedure using the Kullback-Leibler infonnation criteria (KLIC) as a statistical tool to evaluate and compare the predictive abilities of possibly misspecified density forecast models. The main advantage of this statistical tool is that we use the censored likelihood functions to compute the tail minimum of the KLIC, to compare the performance of a density forecast models in the tails. Use of KLIC is practically attractive as well as convenient, given its equivalent of the widely used LR test. We include an illustrative simulation to compare a set of distributions, including symmetric and asymmetric distribution, and a family of GARCH volatility models. Our results on simulated data show that the choice of the conditional distribution appears to be a more dominant factor in determining the adequacy and accuracy (quality) of density forecasts than the choice of volatility model.

Original languageEnglish
Pages (from-to)109-118
Number of pages10
JournalSains Malaysiana
Volume38
Issue number1
Publication statusPublished - Feb 2009

Fingerprint

Density forecasts
GARCH model
Volatility models
Predictive ability
Factors
Conditional distribution
Simulation
Generalized autoregressive conditional heteroscedasticity
Adequacy

Keywords

  • Conditional distribution
  • Density
  • Forecast accuracy
  • GARCH
  • Kullback-Leibler information criteria

ASJC Scopus subject areas

  • General

Cite this

Comparing the accuracy of density forecasts from competing GARCH models. / Md Nor, Abu Hassan Shaari; Shamiri, Ahmad; Isa, Zaidi.

In: Sains Malaysiana, Vol. 38, No. 1, 02.2009, p. 109-118.

Research output: Contribution to journalArticle

Md Nor, AHS, Shamiri, A & Isa, Z 2009, 'Comparing the accuracy of density forecasts from competing GARCH models', Sains Malaysiana, vol. 38, no. 1, pp. 109-118.
Md Nor, Abu Hassan Shaari ; Shamiri, Ahmad ; Isa, Zaidi. / Comparing the accuracy of density forecasts from competing GARCH models. In: Sains Malaysiana. 2009 ; Vol. 38, No. 1. pp. 109-118.
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