One-Factor-GARCH Models for German Stocks - Estimation and Forecasting -

Thomas Kaiser
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Thomas Kaiser: Eberhard-Karls-Universitaet Tuebingen, Germany

Econometrics from EconWPA

Abstract: This paper presents theoretical models and their empirical results for the return and variance dynamics of German stocks. A factor structure is used in order to allow for a parsimonious modeling of the first two moments of returns. Dynamic factor models with GARCH dynamics (GARCH(1,1)-M, IGARCH(1,1)-M, Nonlinear Asymmetric GARCH(1,1)-M and Glosten-Jagannathan-Runkle GARCH(1,1)-M) and three different distributions for the disturbances (Normal, Student's t and Generalized Error Distribution) are considered. Out-of-sample forecasts for the stock returns based upon these models are computed. These forecasts are compared with forecasts based on individual GARCH(1,1)-M models, static factor models, naive, random walk and exponential smoothing forecasts.

Keywords: Dynamic Factors; GARCH; Asset Pricing; Forecasting (search for similar items in EconPapers)
JEL-codes: C32 G12 (search for similar items in EconPapers)
Date: 1996-12-17
Note: Type of Document - Postscript/tared/gzipped; prepared on HP- UX; to print on Postscript; pages: 34 , 19 ; figures: included (seperate files). Tuebinger Diskussionsbeitraege Nr. 87 Wirtschaftswissenschaftliche Fakultaet Eberhard-Karls-Universitaet Tuebingen
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpem:9612007

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