Forecasting volatility with time-varying coefficient regressions
Summary: We extend the heterogeneous autoregressive- (HAR-) type models by explicitly considering the time variation of coefficients in a Bayesian framework and comprehensively comparing the performances of these time-varying coefficient models and constant coefficient models in forecasting the volatility of the Shanghai Stock Exchange Composite Index (SSEC). The empirical results suggest that time-varying coefficient models do generate more accurate out-of-sample forecasts than the corresponding constant coefficient models. By capturing and studying the time series of time-varying coefficients of the predictors, we find that the coefficients (predictive ability) of heterogeneous volatilities are negatively correlated and the leverage effect is not significant or inverse during certain periods. Portfolio exercises also demonstrate the superiority of time-varying coefficient models.
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- Varying Coefficient GARCH Models
- A generalized heterogeneous autoregressive model using market information
- Linear time-varying regression with copula-DCC-GARCH models for volatility
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- Autoregressive conditional heteroskedasticity and changes in regime
- Bayesian forecasting and dynamic models
- Conditional Heteroskedasticity in Asset Returns: A New Approach
- Generalized autoregressive conditional heteroscedasticity
- scientific article; zbMATH DE number 5822909 (Why is no real title available?)
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