Is there an ideal in-sample length for forecasting volatility?

Dimos S. Kambouroudis and David G. McMillan

Journal of International Financial Markets, Institutions and Money, 2015, vol. 37, issue C, 114-137

Abstract: There is limited research carried out to date in the academic literature addressing the issue of the ideal in-sample size when forecasting volatility. This paper therefore considers how much data is required in order to produce accurate forecasts. Broadly speaking, two views exist between practitioners/investors who typically prefer a small in-sample to minimise data holding requirements and researchers/academics who typically chose large in-sample periods. Using a process of expanding window regressions where the in-sample start period expands (backward recursion) we conduct forecasts over twenty-three international markets, including both developed and emerging. Our findings, which demonstrate a degree of homogeneity, show that for the majority of the markets large in-sample periods are not necessary in order to produce the most accurate forecasts supporting the practitioners’/investors’ view.

Keywords: Forecasting; In-sample; Stock market; Volatility (search for similar items in EconPapers)
JEL-codes: C22 G10 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:37:y:2015:i:c:p:114-137

DOI: 10.1016/j.intfin.2015.02.006

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