Modeling and forecasting exchange rate volatility: Comparison between EEC and developed countries

Sinisa Miletic
2015 Industrija  
The main objective of this study is to test the hypothesis that exchange rates in emerging countries are more sensitive to negative shocks than positive ones, and that developed ones do not exhibit this same pattern, at least not with the same intensity. In order to measure the involved risk, symmetric and asymmetric GARCH models are applied. The accuracy of exchange rate volatility forecast is evaluated using the Mincer-Zarnowitz regression based test and Diebold and Mariano test (DM test).
more » ... test (DM test). The daily exchange rate returns of HUF/USD, RON/USD and RSD/USD for EEC countries and, the EUR/USD, GBP/USF and JPY/USD for developed countries are analysed for the period January 3, 2000 to April 15, 2013, in respect. Estimation results confirmed superiority of GARCH model in comparison to asymmetric GARCH models. Results of predictability of conditional variance indicate that GARCH model offers superior performance of forecasting in both of EEC and developed countries. Only in case of Romanian lei TGARCH outperformed GARCH model. Modeliranje i predviđanje deviznog kursa: komparacija zemalja Istočne Evrope i razvijenih zemalja Apstrakt: Osnovni cilj ovoga rada jeste testiranje hipoteze da su devizni kursevi u zemljama u razvoju osetljiviji na negativne šokove u odnosu na 1 Faculty of Business Economy and Entrepreneurship, sinisamiletic72.bgd@gmail.com Miletić S.: Modeling and forecasting exchange rate volatility: comparison between... 8 Industrija, Vol.43, No.1, 2015 pozitivne i da razvijene zemlje ne pokazuju isti obrazac, bar ne sa istim intenzitetom. U cilju merenja tržišnih rizika primenjeni su simetrični GARCH model kao i tri asimetrična GARCH modela. Tačnost prediđanja volatilnosti deviznih kurseva ocenjena je primenom nekoliko najčešće korišćenjih kriterijuma: Mincer-Zarnowitz-ovog regresionog testa i Diebold i Mariano testa (DM test). Dnevni prinosi deviznih kurseva HUF/USD, RON/USD i RSD/USD za zemlje istočne Evrope i, EUR/USD, GBP/USF i JPY/USD za razvijene zemlje analizirani su u periodu od 03. januara 2000 do 15. aprila 2013 godine. Ocenjeni rezultati potvrđuju superiornost GARCH modela u poređenju sa ostalim modelima. Rezultati predviđanja uslovne volatilnosti pokazuju da GARCH modeli poseduju superiornije performance predviđanja kako u zemljama Istočne Evrope tako i u razvijenim zemljama. Samo u slučaju rumunskog leja TGARCH model se pokazao kao superiornijim modelom predviđanja uslovne varijanse u odnosu na simetrični GARCH model. Ključne reči: volatilnost deviznih kurseva, GARCH modeli, zemlje Istočne Evrope, razvijene zemlje, Mincer-Zarnowitz-ev regresioni test, Diebold i Mariano test (DM test).
doi:10.5937/industrija43-6612 fatcat:72hy5j5aafdwndppjm7doc6gba