Analysis of GARCH Modeling in Financial Markets: An Approach Based on Technical Analysis Strategies

Mircea Cristian Gherman ()
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Mircea Cristian Gherman: University of Orleans, France

Acta Universitatis Danubius. OEconomica, 2011, issue 4(4), 158-171

Abstract: In this paper we performed an analysis in order the make an evidence of GARCH modeling on the performances of trading rules applied for a stock market index. Our study relays on the overlap between econometrical modeling, technical analysis and a simulation computing technique. The nonlinear structures presented in the daily returns of the analyzed index and also in other financial series, together with the phenomenon of volatility clustering are premises for applying a GARCH model. In our approach the standardized GARCH innovations are resampled using the bootstrap method. On the simulated data are then applied technical analysis trading strategies. For all the simulated paths the “p-values” are computed in order to verify that the hypothesis concerning the goodness of fit for GARCH model on the BET index is accepted. The processed data with trading rules are showing evidence that GARCH model is a good choice for econometrical modeling of financial time series including the romanian exchange trade index.

Keywords: conditional heteroscedasticity; volatility clustering; conditional variance; bootstrap; trading strategies (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:dug:actaec:y:2011:i:4:p:158-171

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