Modelling and forecasting unbiased extreme value volatility estimator: A study based on exchange rates with economic significance analysis

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Published: Mar 9, 2020
DOI: https://doi.org/10.5750/jpm.v13i1.1581
Keywords:
The AddRS volatility estimator Volatility prediction Volatility components Economic significance analysis.

Main Article Content

Dilip Kumar
Indian Institute of Management Kashipur
http://orcid.org/0000-0003-4858-8440

Abstract

This study proposes the use of an alternate approach to generate more accurate forecasts of an unbiased AddRS estimator. The study also devises and implements trading strategies based on the volatility forecasts to highlight its economic significance. The findings indicate that the proposed framework provides more accurate forecasts of daily volatility in comparison to returns based and range based alternative volatility models. The findings based on economic significance analysis indicate that the risk averse investor can earn substantial gain by using the volatility forecasts of the proposed framework than by using the volatility forecasts of the alternative models.

Article Details

Issue
Vol. 13 No. 1 (2019)
Section
Articles

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