EconPapers    
Economics at your fingertips  
 

Volatility forecasting for risk management

Gita Persand and Chris Brooks
Additional contact information
Gita Persand: Department of Economics, University of Bristol, UK, Postal: Department of Economics, University of Bristol, UK

Journal of Forecasting, 2003, vol. 22, issue 1, 1-22

Abstract: Recent research has suggested that forecast evaluation on the basis of standard statistical loss functions could prefer models which are sub-optimal when used in a practical setting. This paper explores a number of statistical models for predicting the daily volatility of several key UK financial time series. The out-of-sample forecasting performance of various linear and GARCH-type models of volatility are compared with forecasts derived from a multivariate approach. The forecasts are evaluated using traditional metrics, such as mean squared error, and also by how adequately they perform in a modern risk management setting. We find that the relative accuracies of the various methods are highly sensitive to the measure used to evaluate them. Such results have implications for any econometric time series forecasts which are subsequently employed in financial decision making. Copyright © 2002 John Wiley & Sons, Ltd.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (57) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1002/for.841 Link to full text; subscription required (text/html)

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:jof:jforec:v:22:y:2003:i:1:p:1-22

Access Statistics for this article

Journal of Forecasting is currently edited by Derek W. Bunn

More articles in Journal of Forecasting from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing ().

 
Page updated 2019-07-25
Handle: RePEc:jof:jforec:v:22:y:2003:i:1:p:1-22