A Range-Based GARCH Model for Forecasting Volatility

Dennis Mapa ()

MPRA Paper from University Library of Munich, Germany

Abstract: A new variant of the ARCH class of models for forecasting the conditional variance, to be called the Generalized AutoRegressive Conditional Heteroskedasticity Parkinson Range (GARCH-PARK-R) Model, is proposed. The GARCH-PARK-R model, utilizing the extreme values, is a good alternative to the Realized Volatility that requires a large amount of intra-daily data, which remain relatively costly and are not readily available. The estimates of the GARCH-PARK-R model are derived using the Quasi-Maximum Likelihood Estimation (QMLE). The results suggest that the GARCH-PARK-R model is a good middle ground between intra-daily models, such as the Realized Volatility and inter-daily models, such as the ARCH class. The forecasting performance of the models is evaluated using the daily Philippine Peso-U.S. Dollar exchange rate from January 1997 to December 2003.

Keywords: Volatility; Parkinson Range; GARCH-PARK-R; QMLE (search for similar items in EconPapers)
JEL-codes: C01 C32 C51 C52 (search for similar items in EconPapers)
Date: 2003-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published in The Philippine Review of Economics 2.XL(2003): pp. 73-90

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