Determinants of Short-term Volatility at the Warsaw Stock Exchange: In-sample vs. Out-of-sample Forecasts from Factor and Predictive GARCH Models

Janusz Brzeszczynski and Aleksander Welfe

No 408, CERT Discussion Papers from Centre for Economic Reform and Transformation, Heriot Watt University

Abstract: The paper presents factor and predictive GARCH(1,1) models of the Warsaw Stock Exchange (WSE) main index WIG. An approach where the mean equation of the GARCH model includes a deterministic part is applied. The models incorporate such explanatory variables as volume of trade and major international stock market indices. The paper exploits the direction quality measures that can be used as alternative measures to evaluate model goodness of fit. Finally, the in-sample versus the out-of-sample forecasts from the estimated models are compared and model forecasting performance is discussed.

Keywords: stock market; factor GARCH; predictive GARCH; in-sample vs. out-of sample forecasts; direction quality measures; emerging markets (search for similar items in EconPapers)
JEL-codes: C51 G15 (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-rmg and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:hwe:certdp:0408

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