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Forecasting Daily Stock Volatility Using GARCH-CJ Type Models with Continuous and Jump Variation

Turkish Economic Review

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Title Forecasting Daily Stock Volatility Using GARCH-CJ Type Models with Continuous and Jump Variation
 
Creator BOUSALAM, Issam; Doctorant chercheur en sciences économiques
Université Abdelmalek Essaädi - Tanger
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Tél : ​(+212) 661 692 643
 
Subject GARCH-CJ; Jumps variation; Realized volatility; MASI Index; Morocco.
C22; F37; F47; G17.
 
Description Abstract. In this paper we decompose the realized volatility of the GARCH-RV model into continuous sample path variation and discontinuous jump variation to provide a practical and robust framework for non- parametrically measuring the jump component in asset return volatility. By using 5-minute high-frequency data of MASI Index in Morocco for the period (January 15, 2010 - January 29, 2016), we estimate parameters of the constructed GARCH and EGARCH-type models (namely, GARCH, GARCH-RV, GARCH-CJ, EGARCH, EGARCH-RV, and EGARCH-CJ) and evaluate their predictive power to forecast future volatility.  The results show that the realized volatility and the continuous sample path variation have certain predictive power for future volatility while the discontinuous jump variation contains relatively less information for forecasting volatility. More interestingly, the findings show that the GARCH-CJ-type models have stronger predictive power for future volatility than the other two types of models. These results have a major contribution in financial practices such as financial derivatives pricing, capital asset pricing, and risk measures.Keywords. GARCH-CJ, Jumps variation, Realized volatility, MASI Index, Morocco.JEL. C22, F37, F47, G17.
 
Publisher Turkish Economic Review
Turkish Economic Review
 
Contributor —
 
Date 2016-03-18
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
—
 
Format application/pdf
 
Identifier http://www.kspjournals.org/index.php/TER/article/view/678
10.1453/ter.v3i1.678
 
Source Turkish Economic Review; Vol 3, No 1 (2016): March; 160-169
Turkish Economic Review; Vol 3, No 1 (2016): March; 160-169
2149-0414
 
Language eng
 
Relation http://www.kspjournals.org/index.php/TER/article/view/678/729
http://www.kspjournals.org/index.php/TER/article/downloadSuppFile/678/270
http://www.kspjournals.org/index.php/TER/article/downloadSuppFile/678/271
http://www.kspjournals.org/index.php/TER/article/downloadSuppFile/678/272
 
Rights Copyright (c) 2016 Turkish Economic Review
http://creativecommons.org/licenses/by-nc/4.0