NDLI: Using CARR model and GARCH model to forecast volatility of the stock index: Evidence from China's Shanghai stock market

Content Provider	IEEE Xplore Digital Library
Author	Zou Wen-jun Guo Ming-yuan
Copyright Year	2014
Description	Author affiliation: Coll. of Manage. & Econ., Tianjin Univ., Tianjin, China (Zou Wen-jun; Guo Ming-yuan)
Abstract	Generalized autoregressive conditional heteroscedasticity model (henceforth GARCH model) is a successful model for modeling and forecasting the volatility of financial market. But GARCH models use the closing price data of trading days to calculate the return on assets, without considering the asset price changes during the trading day. Especially when asset prices change greatly during the trading day, the volatility estimated by GARCH model is lower than real volatility. The conditional autoregressive range model (henceforth CARR model) use the range data, which is the difference between the highest asset price and lowest asset price during the trading day to study the volatility of asset prices. WCARR model can make full use of asset price change information during the trading day. We use the daily data of China's Shanghai composite index over the period 2002 to 2012 as the sample data and employ CARR model and GARCH model to model the volatility of Shanghai stock market in this paper. The empirical results show that both WCARR model and GARCH model do a great job in fitting the volatility of stock market. We use MZ regression equation, RMSE and MAE to compare the forecasting ability of WCARR model and GARCH-t model. The empirical results show that WCARR model is better than traditional GARCH model both in in-sample forecasting and out-of-sample forecasting.
Starting Page	1106
Ending Page	1112
File Size	489092
Page Count	7
File Format	PDF
ISBN	9781479953752
ISSN	21551855
e-ISBN	9781479953769
DOI	10.1109/ICMSE.2014.6930352
Language	English
Publisher	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Publisher Date	2014-08-17
Publisher Place	Finland
Access Restriction	Subscribed
Rights Holder	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Subject Keyword	CARR model Analytical models Predictive models Data models forecast volatility GARCH model Mathematical model Indexes Stock markets Forecasting
Content Type	Text
Resource Type	Article

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