MGARCH, GO-GARCH, conditional heteroscedasticity, volatility, time-varying correlation
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.
CBN Journal of Applied Statistics
Isenah, Godknows and Olubusoye, Olusanya E.
"Empirical Model for Forecasting Exchange Rate Dynamics: the GO-GARCH Approach,"
CBN Journal of Applied Statistics (JAS): Vol. 7
, Article 9.
Available at: https://dc.cbn.gov.ng/jas/vol7/iss1/9