Comparison of forecasting performance between MODWT-GARCH(1,1) and MODWT-EGARCH(1,1) models: Evidence from African stock markets

Ismail, Mohd Tahir and Audu, Buba and Tumala, Mohammed Musa (2016) Comparison of forecasting performance between MODWT-GARCH(1,1) and MODWT-EGARCH(1,1) models: Evidence from African stock markets. Journal of Finance and Data Science, 2. pp. 254-264. ISSN 2405-9188

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Abstract

Many researchers documented that if stock markets' returns series are significantly skewed, linear-GARCH(1,1) grossly underestimates the forecast values of the returns. However, this study showed that the linear Maximal Overlap Discreet Wavelet Transform MODWT-GARCH(1,1) actually gives an accurate forecast value of the returns. The study used the daily returns of four African countries' stock market indices for the period January 2, 2000, to December 31, 2014. The Maximal Overlap Discreet Wavelet Transform-GARCH(1,1) model and the Maximal Overlap Discreet Wavelet Transform-EGARCH(1,1) model are exhaustively compared. The results show that although both models fit the returns data well, the forecast produced by the Maximal Overlap Discreet Wavelet Transform-EGARCH(1,1) model actually underestimates the observed returns whereas the Maximal Overlap Discreet Wavelet Transform-GARCH(1,1) model generates an accurate forecast value of the observed returns.

Item Type:	Article
Subjects:	Q Science > QA Mathematics > QA1-939 Mathematics
Divisions:	Pusat Pengajian Sains Matematik (School of Mathematical Sciences) > Article
Depositing User:	Mr Noorazilan Noordin
Date Deposited:	23 Jan 2018 01:43
Last Modified:	23 Jan 2018 01:43
URI:	http://eprints.usm.my/id/eprint/38472

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