Arbeitspapier
Choosing the best volatility models: the model confidence set approach
This paper applies the model confidence sets (MCS) procedure to a set of volatility models. A MSC is analogous to a confidence interval of parameter in the sense that the former contains the best forecasting model with a certain probability. The key to the MCS is that it acknowledges the limitations of the information in the data. The empirical exercise is based on fifty-five volatility models, and the MCS includes about a third of these when evaluated by mean square error, whereas the MCS contains only a VGARCH model when mean absolute deviation criterion is used. We conduct a simulation study that shows the MCS captures the superior models across a range of significance levels. When we benchmark the MCS relative to a Bonferroni bound, this bound delivers inferior performance.
- Sprache
-
Englisch
- Erschienen in
-
Series: Working Paper ; No. 2003-28
- Klassifikation
-
Wirtschaft
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Hansen, Peter Reinhard
Lunde, Asger
Nason, James M.
- Ereignis
-
Veröffentlichung
- (wer)
-
Federal Reserve Bank of Atlanta
- (wo)
-
Atlanta, GA
- (wann)
-
2003
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Hansen, Peter Reinhard
- Lunde, Asger
- Nason, James M.
- Federal Reserve Bank of Atlanta
Entstanden
- 2003
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