Simulated Evidence on the Distribution of the Standardized One-Step-Ahead Prediction Errors in ARCH Processes

Stavros Degiannakis and Evdokia Xekalaki

MPRA Paper from University Library of Munich, Germany

Abstract: In statistical modeling contexts, the use of one-step-ahead prediction errors for testing hypotheses on the forecasting ability of an assumed model has been widely considered. Quite often, the testing procedure requires independence in a sequence of recursive standardized prediction errors, which cannot always be readily deduced particularly in the case of econometric modeling. In this paper, the results of a series of Monte Carlo simulations reveal that independence can be assumed to hold.

Keywords: ARCH models; Monte Carlo Simulation; One-step-ahead Prediction Errors; Predictability; Standardized Prediction Error Criterion (search for similar items in EconPapers)
JEL-codes: C32 C40 C52 C53 (search for similar items in EconPapers)
Date: 2007
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Published in Applied Financial Economics Letters 3 (2007): pp. 31-37

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Journal Article: Simulated evidence on the distribution of the standardized one-step-ahead prediction errors in ARCH processes (2007)
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