CBN Journal of Applied Statistics (JAS)
Keywords
MGARCH, GO-GARCH, conditional heteroscedasticity, volatility, time-varying correlation
Abstract
The study aimed at determining a set of superior generalized orthogonal-GARCH (GO-GARCH) models for forecasting time-varying conditional correlations and variances of five foreign exchange rates vis-à-vis the Nigerian Naira. Daily data covering the period 02/01/2009 to 19/03/2015 was used, and four estimators of the GO-GARCH model were considered for fitting the models. Forecast performance tests were conducted using the Diebold-Mariano (DM) and the model confidence set (MCS) tests procedures. The DM test indicates preference for the GO-GARCH model estimated with nonlinear least squares (NLS) estimator – denoted as GOGARCH-NLS, while the MCS test determined a set of superior models (SSM) which comprised of GO-GARCH-NLS and GOGARH model estimated by the method-of-moment, denoted as GO-GARCH-MM. These models were deemed best and adequate for forecasting of the five exchange rate dynamics.
Publication Title
CBN Journal of Applied Statistics
Issue
1(b)
Volume
7
Recommended Citation
Isenah, Godknows and Olubusoye, Olusanya E.
(2016)
"Empirical Model for Forecasting Exchange Rate Dynamics: the GO-GARCH Approach,"
CBN Journal of Applied Statistics (JAS): Vol. 7:
No.
1, Article 9.
Available at:
https://dc.cbn.gov.ng/jas/vol7/iss1/9