Time series forecasting is one of the most important issues in the financial econometrics. In the face of growing interest in models with continuous time, as well as rapid development of methods of their estimation, we try to use the diffusion models to modeling and forecasting time series from various financial markets. We use Monte-Carlo-based method, introduced by Cziraky and Kucherenko (2008). Received forecasts are confronted with those determined with the commonly applied parametrical time series models.
{"title":"Forecasting Financial Processes by Using Diffusion Models","authors":"P. Płuciennik","doi":"10.12775/DEM.2010.005","DOIUrl":"https://doi.org/10.12775/DEM.2010.005","url":null,"abstract":"Time series forecasting is one of the most important issues in the financial econometrics. In the face of growing interest in models with continuous time, as well as rapid development of methods of their estimation, we try to use the diffusion models to modeling and forecasting time series from various financial markets. We use Monte-Carlo-based method, introduced by Cziraky and Kucherenko (2008). Received forecasts are confronted with those determined with the commonly applied parametrical time series models.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"10 1","pages":"51-60"},"PeriodicalIF":0.0,"publicationDate":"2010-07-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66546938","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Evaluating Value at Risk (VaR) methods of predictive accuracy in an objective and effective framework is important for both efficient capital allocation and loss prediction. From this reasons, finding an adequate method of estimating and backtesting is crucial for both the regulators and the risk managers’. The Sign RCA models may be useful to obtain the accurate forecasts of VaR. In this research one briefly describes the Sign RCA models, the Value at Risk and backtesting. We compare the predictive accuracy of alternative VaR forecasts obtained from different models. Empirical example is mainly related to the PBG Capital Group shares on the Warsaw Stock Exchange.
{"title":"The Sign RCA Models: Comparing Predictive Accuracy of VaR Measures","authors":"Joanna Górka","doi":"10.12775/DEM.2010.006","DOIUrl":"https://doi.org/10.12775/DEM.2010.006","url":null,"abstract":"Evaluating Value at Risk (VaR) methods of predictive accuracy in an objective and effective framework is important for both efficient capital allocation and loss prediction. From this reasons, finding an adequate method of estimating and backtesting is crucial for both the regulators and the risk managers’. The Sign RCA models may be useful to obtain the accurate forecasts of VaR. In this research one briefly describes the Sign RCA models, the Value at Risk and backtesting. We compare the predictive accuracy of alternative VaR forecasts obtained from different models. Empirical example is mainly related to the PBG Capital Group shares on the Warsaw Stock Exchange.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"10 1","pages":"61-80"},"PeriodicalIF":0.0,"publicationDate":"2010-07-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66546994","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The purpose of the paper is to present and apply the accumulative one-step-ahead prediction error (APE) not only as a method (strategy) of model selection, but also as a tool of model selection strategy (meta-selection). The APE method is compared with the information approach to model selection (AIC and BIC information criteria), supported by empirical examples. Obtained results indicated that the APE method may be of considerable practical importance.
{"title":"Choosing a Model and Strategy of Model Selection by Accumulated Prediction Error","authors":"M. Piłatowska","doi":"10.12775/DEM.2010.009","DOIUrl":"https://doi.org/10.12775/DEM.2010.009","url":null,"abstract":"The purpose of the paper is to present and apply the accumulative one-step-ahead prediction error (APE) not only as a method (strategy) of model selection, but also as a tool of model selection strategy (meta-selection). The APE method is compared with the information approach to model selection (AIC and BIC information criteria), supported by empirical examples. Obtained results indicated that the APE method may be of considerable practical importance.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"10 1","pages":"107-119"},"PeriodicalIF":0.0,"publicationDate":"2010-07-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66547095","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper aims to use the local level models with GARCH and SV errors to predict Polish inflation. The series to be forecast, measured monthly, is consumer price index (CPI) in Poland during 1992-2008. We selected three forecasting models i.e. LL-GARCH(1,1) with Normal or Student errors and LL-SV. A simple AR(2)-SV model is used as a benchmark to assess the accuracy of prediction. The presented results indicate, that there is no clear advantage of LL models in forecasting Polish inflation over standard AR(2)-SV model, although all the models give satisfactory results.
{"title":"Unobserved Component Model for Forecasting Polish Inflation","authors":"J. Kwiatkowski","doi":"10.12775/DEM.2010.010","DOIUrl":"https://doi.org/10.12775/DEM.2010.010","url":null,"abstract":"This paper aims to use the local level models with GARCH and SV errors to predict Polish inflation. The series to be forecast, measured monthly, is consumer price index (CPI) in Poland during 1992-2008. We selected three forecasting models i.e. LL-GARCH(1,1) with Normal or Student errors and LL-SV. A simple AR(2)-SV model is used as a benchmark to assess the accuracy of prediction. The presented results indicate, that there is no clear advantage of LL models in forecasting Polish inflation over standard AR(2)-SV model, although all the models give satisfactory results.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"10 1","pages":"121-129"},"PeriodicalIF":0.0,"publicationDate":"2010-07-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66547346","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article contains an analysis of dynamic interrelations between log-returns series of three automotive companies listed on the New York Stock Exchange: GM, F and DAI. We consider two periods: before and during crisis. We apply DiagBEKK model and we calculate dynamic conditional correlations. As a result of our research we found that in conditions of crisis there were strong connections between considered stock companies.
{"title":"Dynamics of Multivariate Return Series of U.S. Automotive Stock Companies in Conditions of Crisis","authors":"Blanka Łęt","doi":"10.12775/DEM.2010.004","DOIUrl":"https://doi.org/10.12775/DEM.2010.004","url":null,"abstract":"This article contains an analysis of dynamic interrelations between log-returns series of three automotive companies listed on the New York Stock Exchange: GM, F and DAI. We consider two periods: before and during crisis. We apply DiagBEKK model and we calculate dynamic conditional correlations. As a result of our research we found that in conditions of crisis there were strong connections between considered stock companies.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"10 1","pages":"43-50"},"PeriodicalIF":0.0,"publicationDate":"2010-07-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66546887","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Construction, estimation and application of the mutual information measure have been presented in this paper. The simulations have been carried out to verify its usefulness to detect nonlinear serial dependencies. Moreover, the mutual information measure has been applied to the indices and the sector sub-indices of the Warsaw Stock Exchange.
{"title":"Measuring Nonlinear Serial Dependencies Using the Mutual Information Coefficient","authors":"W. Orzeszko","doi":"10.12775/DEM.2010.008","DOIUrl":"https://doi.org/10.12775/DEM.2010.008","url":null,"abstract":"Construction, estimation and application of the mutual information measure have been presented in this paper. The simulations have been carried out to verify its usefulness to detect nonlinear serial dependencies. Moreover, the mutual information measure has been applied to the indices and the sector sub-indices of the Warsaw Stock Exchange.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"10 1","pages":"97-106"},"PeriodicalIF":0.0,"publicationDate":"2010-07-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66547440","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The empirical analysis of the term structure of the Polish interbank rates has revealed that the short and the long rates from the whole spectrum of maturities have evolved almost accordingly to the expectations hypothesis. They have exhibited common stochastic trends, their spreads have had cointegrating properties as well as much predictive power. Of all interest rates considered it is only a 3 month rate that has asymmetrically been reverting to the mean.
{"title":"The Term Structure of the Polish Interbank Rates. A Note on the Symmetry of their Reversion to the Mean","authors":"Paweł Miłobędzki","doi":"10.12775/DEM.2010.007","DOIUrl":"https://doi.org/10.12775/DEM.2010.007","url":null,"abstract":"The empirical analysis of the term structure of the Polish interbank rates has revealed that the short and the long rates from the whole spectrum of maturities have evolved almost accordingly to the expectations hypothesis. They have exhibited common stochastic trends, their spreads have had cointegrating properties as well as much predictive power. Of all interest rates considered it is only a 3 month rate that has asymmetrically been reverting to the mean.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"10 1","pages":"83-95"},"PeriodicalIF":0.0,"publicationDate":"2010-07-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66547265","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Taylor stated humorously that his rule was so easy that it could be written down on the back of a business card. The reality shows that the practical use of this type of rule implies accepting many assumptions about its final shape. The article mentions only the matter of influence of calculating the potential GDP and output gap on the empirical relevance of the Taylor rule. Two ways of calculating potential GDP were presented, i.e. the HP filter and linear trend of the current and the real GDP both seasonally adjusted (an additive model with seasonal dummies; TRAMO/SEATS procedure).
{"title":"The Importance of Calculating the Potential Gross Domestic Product in the Context of the Taylor Rule","authors":"Anna Michałek","doi":"10.12775/DEM.2010.011","DOIUrl":"https://doi.org/10.12775/DEM.2010.011","url":null,"abstract":"Taylor stated humorously that his rule was so easy that it could be written down on the back of a business card. The reality shows that the practical use of this type of rule implies accepting many assumptions about its final shape. The article mentions only the matter of influence of calculating the potential GDP and output gap on the empirical relevance of the Taylor rule. Two ways of calculating potential GDP were presented, i.e. the HP filter and linear trend of the current and the real GDP both seasonally adjusted (an additive model with seasonal dummies; TRAMO/SEATS procedure).","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"10 1","pages":"132-143"},"PeriodicalIF":0.0,"publicationDate":"2010-07-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66547717","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The availability of ultra-high frequency data justifies the use of a continuous-time approach in stock prices modeling. However, this data contain, apart from the information about the price process, a microstructure noise causing a bias in the realized volatility. This noise is connected with all the reality of trade. In the paper we separate the microstructure noise from the price process and determine the noise to signal ratio for the estimates of the realized volatility in the case of the shares of the Polish company Pekao S.A. The results are used to discover the optimal sampling frequency for the realized volatility calculation. Moreover, we check the linkages between the noise and some liquidity measures.
{"title":"Liquidity and Market Microstructure Noise: Evidence from the Pekao Data","authors":"Małgorzata Doman","doi":"10.12775/DEM.2010.001","DOIUrl":"https://doi.org/10.12775/DEM.2010.001","url":null,"abstract":"The availability of ultra-high frequency data justifies the use of a continuous-time approach in stock prices modeling. However, this data contain, apart from the information about the price process, a microstructure noise causing a bias in the realized volatility. This noise is connected with all the reality of trade. In the paper we separate the microstructure noise from the price process and determine the noise to signal ratio for the estimates of the realized volatility in the case of the shares of the Polish company Pekao S.A. The results are used to discover the optimal sampling frequency for the realized volatility calculation. Moreover, we check the linkages between the noise and some liquidity measures.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"10 1","pages":"5-14"},"PeriodicalIF":0.0,"publicationDate":"2010-07-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66546731","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Elliptical distributions commonly applied to modeling the returns of stocks in highdimensional portfolio are not capable of adequate describing the dependence between the components when their statistical properties are very diverse. The MGARCH and standard dynamic copula models are often of little usefulness in such cases. In this paper, we apply a methodology called the pair-copula decomposition to model the joint conditional distribution of the returns on stocks constituting the WIG20 index, and show some advantage of this construction over the approach using the t Student DCC model.
{"title":"Modeling the Dependence Structure of the WIG20 Portfolio Using a Pair-copula Construction","authors":"R. Doman","doi":"10.12775/DEM.2010.003","DOIUrl":"https://doi.org/10.12775/DEM.2010.003","url":null,"abstract":"Elliptical distributions commonly applied to modeling the returns of stocks in highdimensional portfolio are not capable of adequate describing the dependence between the components when their statistical properties are very diverse. The MGARCH and standard dynamic copula models are often of little usefulness in such cases. In this paper, we apply a methodology called the pair-copula decomposition to model the joint conditional distribution of the returns on stocks constituting the WIG20 index, and show some advantage of this construction over the approach using the t Student DCC model.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"10 1","pages":"31-42"},"PeriodicalIF":0.0,"publicationDate":"2010-07-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66546768","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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