Physical Sciences and Mathematics Commons^™

Misspecification Of Variants Of Autoregressive Garch Models And Effect On In-Sample Forecasting, Olusanya E. Olubusoye, Olaoluwa S. Yaya, Oluwadare O. Ojo

Journal of Modern Applied Statistical Methods

Generally, in empirical financial studies, the determination of the true conditional variance in GARCH modelling is largely subjective. In this paper, we investigate the consequences of choosing a wrong conditional variance specification. The methodology involves specifying a true conditional variance and then simulating data to conform to the true specification. The estimation is then carried out using the true specification and other plausible specification that are appealing to the researcher, using model and forecast evaluation criteria for assessing performance. The results show that GARCH model could serve as better alternative to other asymmetric volatility models.

Essays On Oil Price Volatility And Irreversible Investment, Daniel Joseph Pastor

Wayne State University Dissertations

In chapter 1, we provide an extensive and systematic evaluation of the relative

forecasting performance of several models for the volatility of daily spot

crude oil prices. Empirical research over the past decades has uncovered

significant gains in forecasting performance of Markov Switching GARCH

models over GARCH models for the volatility of financial assets and crude

oil futures. We find that, for spot oil price returns, non-switching models

perform better in the short run, whereas switching models tend to do better

at longer horizons.

In chapter 2, I investigate the impact of volatility on firms' irreversible investment decisions using real …