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Perspectives on Risk Measurement - A Critical Assessment of PC-GARCH Against the Main Volatility Forecasting Models
Citation
Matei, M, Perspectives on Risk Measurement - A Critical Assessment of PC-GARCH Against the Main Volatility Forecasting Models, Romanian Journal of Economic Forecasting, 15, (1) Article 6. ISSN 1582-6163 (2012) [Refereed Article]
Copyright Statement
Copyright 2012 Institute for Economic Forecasting
Official URL: https://ideas.repec.org/a/rjr/romjef/vy2012i1p95-1...
Abstract
The paper makes a critical assessment of the Principal Components-GARCH (PCGARCH)
model and argues why, when dealing with hundreds or thousands of
variables, this model comes up as the most appropriate to be used. The suitability
originates from the perspective of quality/cost ratio of volatility forecasts, allowing for a
trade-off between quality and costs when computational efforts are significant. PCGARCH
not only provides a method that allows for simpler volatility modeling,
reducing significantly the computational time and getting rid of any problem that may
arise from complex data manipulations, but also improves the modeling process
quality by ensuring a stricter control of noise due to more stable correlation estimates.
Item Details
Item Type: | Refereed Article |
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Keywords: | GARCH models, volatility forecasting, econometric models, evaluating forecasts, nonlinear time series |
Research Division: | Commerce, Management, Tourism and Services |
Research Group: | Banking, finance and investment |
Research Field: | Financial econometrics |
Objective Division: | Economic Framework |
Objective Group: | Measurement standards and calibration services |
Objective Field: | Measurement standards and calibration services not elsewhere classified |
UTAS Author: | Matei, M (Dr Marius Matei) |
ID Code: | 99868 |
Year Published: | 2012 |
Web of Science® Times Cited: | 1 |
Deposited By: | Economics and Finance |
Deposited On: | 2015-04-14 |
Last Modified: | 2015-05-11 |
Downloads: | 0 |
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