Forecasting volatility in the Chinese stock market under model uncertainty |
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| Institution: | 1. Hanqing Advanced Institute of Economics and Finance, Renmin University of China, Beijing 100872, China;2. China Investment Securities, Shenzhen 518048, China;3. Institute of China''s Economic Reform & Development, Renmin University of China, Beijing 100872, China;1. Division of Hematology & Oncology, Department of Medicine, College of Medicine, University of Florida, Gainesville, Florida, USA;2. Department of Molecular Genetics and Microbiology, College of Medicine, University of Florida, Gainesville, Florida, USA;1. Department of Microbiology and Plant Pathology, University of California, Riverside, Riverside, CA, USA |
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| Abstract: | Volatility forecasting is an important issue in empirical finance. In this paper, the main purpose is to apply the model averaging techniques to reduce volatility model uncertainty and improve volatility forecasting. Six GARCH-type models are considered as candidate models for model averaging. As to the Chinese stock market, the largest emerging market in the world, the empirical study shows that forecast combination using model averaging can be a better approach than the individual forecasts. |
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