EconPapers    
Economics at your fingertips  
 

General-to-specific modelling of exchange rate volatility: A forecast evaluation

Luc Bauwens () and Genaro Sucarrat

International Journal of Forecasting, 2010, vol. 26, issue 4, 885-907

Abstract: The general-to-specific (GETS) methodology is widely employed in the modelling of economic series, but less so in financial volatility modelling, due to its computational complexity when many explanatory variables are involved. This study proposes a simple way of avoiding this problem when the conditional mean can appropriately be restricted to zero, and undertakes an out-of-sample forecast evaluation of the methodology applied to the modelling of the weekly exchange rate volatility. Our findings suggest that GETS specifications perform comparatively well in both ex post and ex ante forecasting as long as sufficient care is taken with respect to the functional form and the way in which the conditioning information is used. Also, our forecast comparison provides an example of a discrete time explanatory model being more accurate than the realised volatility ex post in 1-step-ahead forecasting.

Keywords: Exchange; rate; volatility; General-to-specific; Forecasting (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (8) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0169-2070(10)00111-1
Full text for ScienceDirect subscribers only

Related works:
Working Paper: General-to-specific modelling of exchange rate volatility: a forecast evaluation (2010) Downloads
Working Paper: General to specific modelling of exchange rate volatility: a forecast evaluation (2008) Downloads
Working Paper: General to specific modelling of exchange rate volatility: a forecast evaluation (2006) Downloads
Working Paper: General to Specific Modelling of Exchange Rate Volatility: a Forecast Evaluation (2006) Downloads
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:eee:intfor:v:26:y::i:4:p:885-907

Access Statistics for this article

International Journal of Forecasting is currently edited by R. J. Hyndman

More articles in International Journal of Forecasting from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2018-05-22
Handle: RePEc:eee:intfor:v:26:y::i:4:p:885-907