Forecasting Nonlinear Functions of Returns Using LINEX Loss Functions

Soosung Hwang (), John Knight and Stephen Satchell
Additional contact information
Stephen Satchell: Trinity College and Faculty of Economics and Politics, University of Cambridge

Annals of Economics and Finance, 2001, vol. 2, issue 1, 187-213

Abstract: This paper applies LINEX loss functions to forecasting nonlinear functions of variance. We derive the optimal one-step-ahead LINEX forecast for various volatility models using data transformations such as ln(y2t) where yt is the return of the asset. Our results suggest that the LINEX loss function is particularly well-suited to many of these forecasting problems and can give better forecasts than conventional loss functions such as mean square error (MSE).

Keywords: LINEX Loss Function; Forecasting; Volatility (search for similar items in EconPapers)
JEL-codes: C22 C53 (search for similar items in EconPapers)
Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://aeconf.com/Articles/May2001/aef020109.pdf (application/pdf)
http://down.aefweb.net/AefArticles/aef020109.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2001:v:2:i:1:p:187-213

Access Statistics for this article

Annals of Economics and Finance is currently edited by Heng-fu Zou

More articles in Annals of Economics and Finance from Society for AEF Contact information at EDIRC.
Bibliographic data for series maintained by Qiang Gao ().