Beating the Random Walk: Intraday Seasonality and Volatility in a Developing Stock Market

Kim-Leng Goh and Kim-Lian Kok
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Kim-Lian Kok: Taylor's Business School, Malaysia

International Journal of Business and Economics, 2006, vol. 5, issue 1, 41-59

Abstract: Historical prices information has not been exhaustively exploited in forecasting the 10-minute-ahead Composite Index of the Malaysian stock market. A simple model incorporating intraday seasonality can have lower forecast errors than a random walk. Improved accuracy is achieved when time-varying volatility is included in the time-of-day seasonal model for both in-sample and out-of-sample forecasts. The updating of parameter estimates of these volatility models at each new forecast origin to incorporate the latest available information leads to further improvement in forecast performance.

Keywords: calendar effects; forecast; ARCH models; random walk (search for similar items in EconPapers)
JEL-codes: C53 G14 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (1)

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