Forecasting interest rate volatility of the United Kingdom: evidence from over 150 years of data

Hossein Hassani, Mohammad Reza Yeganegi, Juncal Cuñado and Rangan Gupta

Journal of Applied Statistics, 2020, vol. 47, issue 6, 1128-1143

Abstract: This study examines the very short, short, medium and long-term forecasting ability of different univariate GARCH models of United Kingdom (UK)'s interest rate volatility, using a long span monthly data from May 1836 to June 2018. The main results show the relevance of considering alternative error distributions to the normal distribution when estimating GARCH-type models. Thus, we obtain that the Asymmetric Power ARCH (A-PARCH) models with skew generalized error distribution are the most accurate models when forecasting UK interest rates, while for the short, medium and long-term term forecasting horizons, GARCH models with generalized error distribution for the error term are the most accurate models in forecasting UK's interest rates.

Date: 2020
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Working Paper: Forecasting Interest Rate Volatility of the United Kingdom: Evidence from over 150 Years of Data (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:taf:japsta:v:47:y:2020:i:6:p:1128-1143

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DOI: 10.1080/02664763.2019.1666093

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