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Social and Behavioral Sciences Commons™

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Statistics and Probability

Selected Works

2002

Articles 1 - 2 of 2

Full-Text Articles in Social and Behavioral Sciences

Optimal Policies For Investment With Time-Varying Return Distributions, Douglas Steigerwald, Doncho Donchev, Svetlozar Rachev Dec 2001

Optimal Policies For Investment With Time-Varying Return Distributions, Douglas Steigerwald, Doncho Donchev, Svetlozar Rachev

Douglas G. Steigerwald

We develop a model in which investors must learn the distribution of asset returns over time. The process of learning is made more difficult by the fact that the distributions are not constant through time. We consider risk-neutral investors who have quadratic utility and are selecting between two risky assets. We determine the time at which it is optimal to update the distribution estimate and, hence, alter portfolio weights. Our results deliver an optimal policy for asset allocation, that is, the sequence of time intervals at which it is optimal to switch between assets, based on stochastic optimal control theory. …

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Forecasting Volatility In European Stock Markets With Non-Linear Garch Models, Giancarlo Forte, Matteo Manera Dec 2001

Forecasting Volatility In European Stock Markets With Non-Linear Garch Models, Giancarlo Forte, Matteo Manera

Matteo Manera

This paper investigates the forecasting performance of three popular variants of the nonlinear GARCH models, namely VS-GARCH, GJR-GARCH and Q-GARCH, with the symmetric GARCH(1,1) model as a benchmark. The application involves ten European stock price indexes. Forecasts produced by each non-linear GARCH model and each index are evaluated using a common set of classical criteria, as well as forecast combination techniques with constant and non-constant weights. With respect to the standard GARCH specification, the non-linear models generally lead to better forecasts in terms of both smaller forecast errors and lower biases. In-sample forecast combination regressions are better than those from …

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