Evaluating non-linear models on point and interval forecasts: an application with exchange rates
The aim of this paper is to compare the forecasting performance of SETAR and GARCH models against a linear benchmark using historical data for two bilateral dollar exchange rates, namely the Japanese Yen and the British Pound. The analysis is carried out with series sampled at weekly and daily freq...
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| Format: | Article |
| Language: | English |
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Associazione Economia civile
2012-04-01
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| Series: | PSL Quarterly Review |
| Subjects: | |
| Online Access: | https://rosa.uniroma1.it/rosa04/psl_quarterly_review/article/view/9837 |
| _version_ | 1811172411840659456 |
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| author | Gianna Boero Emanuela Marrocu |
| author_facet | Gianna Boero Emanuela Marrocu |
| author_sort | Gianna Boero |
| collection | DOAJ |
| description |
The aim of this paper is to compare the forecasting performance of SETAR and GARCH models against a linear benchmark using historical data for two bilateral dollar exchange rates, namely the Japanese Yen and the British Pound. The analysis is carried out with series sampled at weekly and daily frequencies. The relative performance of the models is evaluated on point forecasts and interval forecasts. Point forecasts evaluation tends to favour on average the linear models, though the analysis produces some evidence of forecasting gains from nonlinear models in sub-samples characterised by stronger non-linearity. Evaluation of interval forecasts clearly favours the GARCH models and shows that they are more accurate than the AR and SETAR models, especially at forecasting events in the tail regions of the distribution.
JEL Codes: F31, F37
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| first_indexed | 2024-04-10T17:29:35Z |
| format | Article |
| id | doaj.art-c2daf0c4128b486e963b54936c0ee80e |
| institution | Directory Open Access Journal |
| issn | 2037-3635 2037-3643 |
| language | English |
| last_indexed | 2024-04-10T17:29:35Z |
| publishDate | 2012-04-01 |
| publisher | Associazione Economia civile |
| record_format | Article |
| series | PSL Quarterly Review |
| spelling | doaj.art-c2daf0c4128b486e963b54936c0ee80e2023-02-03T16:48:39ZengAssociazione Economia civilePSL Quarterly Review2037-36352037-36432012-04-015823210.13133/2037-3643/9837Evaluating non-linear models on point and interval forecasts: an application with exchange ratesGianna BoeroEmanuela Marrocu The aim of this paper is to compare the forecasting performance of SETAR and GARCH models against a linear benchmark using historical data for two bilateral dollar exchange rates, namely the Japanese Yen and the British Pound. The analysis is carried out with series sampled at weekly and daily frequencies. The relative performance of the models is evaluated on point forecasts and interval forecasts. Point forecasts evaluation tends to favour on average the linear models, though the analysis produces some evidence of forecasting gains from nonlinear models in sub-samples characterised by stronger non-linearity. Evaluation of interval forecasts clearly favours the GARCH models and shows that they are more accurate than the AR and SETAR models, especially at forecasting events in the tail regions of the distribution. JEL Codes: F31, F37 https://rosa.uniroma1.it/rosa04/psl_quarterly_review/article/view/9837Exchange Rates |
| spellingShingle | Gianna Boero Emanuela Marrocu Evaluating non-linear models on point and interval forecasts: an application with exchange rates PSL Quarterly Review Exchange Rates |
| title | Evaluating non-linear models on point and interval forecasts: an application with exchange rates |
| title_full | Evaluating non-linear models on point and interval forecasts: an application with exchange rates |
| title_fullStr | Evaluating non-linear models on point and interval forecasts: an application with exchange rates |
| title_full_unstemmed | Evaluating non-linear models on point and interval forecasts: an application with exchange rates |
| title_short | Evaluating non-linear models on point and interval forecasts: an application with exchange rates |
| title_sort | evaluating non linear models on point and interval forecasts an application with exchange rates |
| topic | Exchange Rates |
| url | https://rosa.uniroma1.it/rosa04/psl_quarterly_review/article/view/9837 |
| work_keys_str_mv | AT giannaboero evaluatingnonlinearmodelsonpointandintervalforecastsanapplicationwithexchangerates AT emanuelamarrocu evaluatingnonlinearmodelsonpointandintervalforecastsanapplicationwithexchangerates |