Author： Hansson Björn Hördahl Peter
Publisher： Routledge Ltd
ISSN： 1466-4364
Source： The European Journal of Finance, Vol.11, Iss.1, 2005-02, pp. : 33-57
Disclaimer: Any content in publications that violate the sovereignty, the constitution or regulations of the PRC is not accepted or approved by CNPIEC.
Abstract
This paper estimates the conditional variance of daily Swedish OMX-index returns with stochastic volatility (SV) models and GARCH models and evaluates the in-sample performance as well as the out-of-sample forecasting ability of the models. Asymmetric as well as weekend/holiday effects are allowed for in the variance, and the assumption that errors are Gaussian is released. Evidence is found of a leverage effect and of higher variance during weekends. In both in-sample and out-of-sample comparisons SV models outperform GARCH models. However, while asymmetry, weekend/holiday effects and non-Gaussian errors are important for the in-sample fit, it is found that these factors do not contribute to enhancing the forecasting ability of the SV models.
Related content
Access to resources
Recommend
By Javaheri Alireza Wilmott Paul Haug Espen G
Quantitative Finance, Vol. 4, Iss. 5, 2004-10 ,pp. :