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General to Specific Modelling of Exchange Rate Volatility: A Forecast Evaluation
, 2006
"... The generaltospecific (GETS) approach to modelling is widely employed in the modelling of economic series, but less so in financial volatility modelling due to computational complexity when many explanatory variables are involved. This study proposes a simple way of avoiding this problem and under ..."
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Cited by 12 (8 self)
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The generaltospecific (GETS) approach to modelling is widely employed in the modelling of economic series, but less so in financial volatility modelling due to computational complexity when many explanatory variables are involved. This study proposes a simple way of avoiding this problem and undertakes an outofsample forecast evaluation of the methodology applied to the modelling of weekly exchange rate volatility. Our findings suggest that GETS specifications are especially valuable in conditional forecasting, since the specification that employs actual values on the uncertain information performs particularly well.
Forecast Evaluation of Explanatory Models of Financial Variability. Economics – The OpenAccess, OpenAssessment EJournal 3. Available via: http://www.economicsejournal.org/economics
, 2009
"... A practice that has become widespread and widely endorsed is that of evaluating forecasts of financial variability obtained from discrete time models by comparing them with highfrequency ex post estimates (e.g. realised volatility) based on continuous time theory. In explanatory financial variabili ..."
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Cited by 11 (8 self)
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A practice that has become widespread and widely endorsed is that of evaluating forecasts of financial variability obtained from discrete time models by comparing them with highfrequency ex post estimates (e.g. realised volatility) based on continuous time theory. In explanatory financial variability modelling this raises several methodological and practical issues, which suggests an alternative approach is needed. The contribution of this study is twofold. First, the finite sample properties of operational and practical procedures for the forecast evaluation of explanatory discrete time models of financial variability are studied. Second, based on the simulation results a simple but general framework is proposed and illustrated. The illustration provides an example of where an explanatory model outperforms realised volatility ex post.
Correspondence
, 2009
"... A practice that has become widespread and widely endorsed is that of evaluating forecasts of financial variability obtained from discrete time models by comparing them with highfrequency ex post estimates (e.g. realised volatility) based on continuous time theory. In explanatory financial variabil ..."
Abstract
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A practice that has become widespread and widely endorsed is that of evaluating forecasts of financial variability obtained from discrete time models by comparing them with highfrequency ex post estimates (e.g. realised volatility) based on continuous time theory. In explanatory financial variability modelling this raises several methodological and practical issues, which suggests an alternative approach is needed. The contribution of this study is twofold. First, the finite sample properties of operational and practical procedures for the forecast evaluation of explanatory discrete time models of financial variability are studied. Second, based on the simulation results a simple but general framework is proposed and illustrated. The illustration provides an example of where an explanatory model outperforms realised volatility ex post. Special issue “Using Econometrics for Assessing Economic Models”
Discussion of Anna Naszodi’s paper: The Asset Pricing Model of Exchange Rate and its Test on Survey Data
, 2009
"... • Objective of paper: To test the asset price model of exchange rates using survey data • Essence of asset price approach: The price of a currency (the exchange rate) is a function of its expected change ..."
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• Objective of paper: To test the asset price model of exchange rates using survey data • Essence of asset price approach: The price of a currency (the exchange rate) is a function of its expected change