Long Run Estimations for the Volatility of Time Series in the Brazilian Financial Market
The models of the GARCH family, normally used for the estimates of volatility for longer periods, keep unchanged the relative weights assigned to the observations both old and new, regardless of the volatility´s forecasted horizon. The purpose of this article is to verify if the increase in relativ...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Brazilian Society of Finance
2014-03-01
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| Series: | Revista Brasileira de Finanças |
| Subjects: | |
| Online Access: | http://bibliotecadigital.fgv.br/ojs/index.php/rbfin/article/view/8187 |
| _version_ | 1819240547566485504 |
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| author | Alex Sandro Monteiro de Moraes Antonio Carlos Figueiredo Pinto Marcelo Cabus Klotzle |
| author_facet | Alex Sandro Monteiro de Moraes Antonio Carlos Figueiredo Pinto Marcelo Cabus Klotzle |
| author_sort | Alex Sandro Monteiro de Moraes |
| collection | DOAJ |
| description | The models of the GARCH family, normally used for the estimates of volatility for longer periods, keep unchanged the relative weights assigned to the observations both old and new, regardless of the volatility´s forecasted horizon. The purpose of this article is to verify if the increase in relative weights assigned to the earlier observations due to the increase of the forecast horizon results in better estimates of volatility. Through the use of seven forecasting models of volatility and return series of financial markets assets, the estimates obtained in the sample (in-sample) were compared with observations outside the sample (out-of-sample). Based on this comparison, it was found that the best estimates of expected volatility were obtained by the modified EGARCH model and the ARLS model. We conclude that the use of traditional forecasting models of volatility, which keep unchanged relative weights assigned to both old and new observations, was inappropriate. |
| first_indexed | 2024-12-23T14:09:45Z |
| format | Article |
| id | doaj.art-33553f6b6bcf40cbbcd5f2a716cab041 |
| institution | Directory Open Access Journal |
| issn | 1679-0731 1984-5146 |
| language | English |
| last_indexed | 2024-12-23T14:09:45Z |
| publishDate | 2014-03-01 |
| publisher | Brazilian Society of Finance |
| record_format | Article |
| series | Revista Brasileira de Finanças |
| spelling | doaj.art-33553f6b6bcf40cbbcd5f2a716cab0412022-12-21T17:44:04ZengBrazilian Society of FinanceRevista Brasileira de Finanças1679-07311984-51462014-03-01114455479Long Run Estimations for the Volatility of Time Series in the Brazilian Financial MarketAlex Sandro Monteiro de Moraes0Antonio Carlos Figueiredo Pinto1Marcelo Cabus Klotzle2Pontifícia Universidade Católica do Rio de JaneiroPontifícia Universidade Católica do Rio de JaneiroPontifícia Universidade Católica do Rio de JaneiroThe models of the GARCH family, normally used for the estimates of volatility for longer periods, keep unchanged the relative weights assigned to the observations both old and new, regardless of the volatility´s forecasted horizon. The purpose of this article is to verify if the increase in relative weights assigned to the earlier observations due to the increase of the forecast horizon results in better estimates of volatility. Through the use of seven forecasting models of volatility and return series of financial markets assets, the estimates obtained in the sample (in-sample) were compared with observations outside the sample (out-of-sample). Based on this comparison, it was found that the best estimates of expected volatility were obtained by the modified EGARCH model and the ARLS model. We conclude that the use of traditional forecasting models of volatility, which keep unchanged relative weights assigned to both old and new observations, was inappropriate.http://bibliotecadigital.fgv.br/ojs/index.php/rbfin/article/view/8187Integrated VolatilityLong-term volatilityGARCH Models |
| spellingShingle | Alex Sandro Monteiro de Moraes Antonio Carlos Figueiredo Pinto Marcelo Cabus Klotzle Long Run Estimations for the Volatility of Time Series in the Brazilian Financial Market Revista Brasileira de Finanças Integrated Volatility Long-term volatility GARCH Models |
| title | Long Run Estimations for the Volatility of Time Series in the Brazilian Financial Market |
| title_full | Long Run Estimations for the Volatility of Time Series in the Brazilian Financial Market |
| title_fullStr | Long Run Estimations for the Volatility of Time Series in the Brazilian Financial Market |
| title_full_unstemmed | Long Run Estimations for the Volatility of Time Series in the Brazilian Financial Market |
| title_short | Long Run Estimations for the Volatility of Time Series in the Brazilian Financial Market |
| title_sort | long run estimations for the volatility of time series in the brazilian financial market |
| topic | Integrated Volatility Long-term volatility GARCH Models |
| url | http://bibliotecadigital.fgv.br/ojs/index.php/rbfin/article/view/8187 |
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