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Steeley, JM and Bailey, G (2019) Forecasting the volatility of the Australian Dollar using high frequency data: Does estimator accuracy improve forecast evaluation? International Journal of Finance and Economics, 24 (3). pp. 1355-1389. ISSN 1076-9307
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Does estimator accuracy enhance the evaluation of volatility forecasts_no title page_v2.docx - Accepted Version
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Abstract
We compare forecasts of the volatility of the Australian Dollar exchange rate to alternative measures of ex-post volatility. We develop and apply a simple test for the improvement in the ability of loss functions to distinguish between forecasts when the quality of a volatility estimator is increased. We find that both realized variance and the daily high-low range provide a significant improvement in loss function convergence relative to squared returns. We find that a model of stochastic volatility provides the best forecasts for models that use daily data, and the GARCH(1,1) model provides the best forecast using high-frequency data.
Item Type: | Article |
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Additional Information: | This is the accepted author manuscript (AAM). The final published version (version of record) will be available online via Wiley at https://onlinelibrary.wiley.com/journal/10991158 - please refer to any applicable terms of use of the publisher. |
Uncontrolled Keywords: | Volatility forecasting, exchange rate, Australian Dollar, stochastic volatility, realized variance, high-low range |
Subjects: | H Social Sciences > HC Economic History and Conditions |
Divisions: | Faculty of Humanities and Social Sciences > Keele Management School |
Depositing User: | Symplectic |
Date Deposited: | 31 Jan 2019 14:33 |
Last Modified: | 03 Apr 2021 01:30 |
URI: | https://eprints.keele.ac.uk/id/eprint/5740 |