Volatility forecasts evaluation and comparison

Laurent , Sébastien;Violante, Francesco
(2012) WIREs Computational Statistics —

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  • Laurent , SébastienUniversiteit Maastricht
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  • Violante, FrancescoUniversiteit Maastricht
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Abstract
This article surveys the most important developments in volatility forecast comparison and model selection.We review a number of evaluation methods and testing procedures for predictive accuracy based on statistical loss functions. We also review recent contributions on the admissible form of loss functions ensuring consistency of the ordering when forecast performances are evaluated with respect to an imperfect volatility proxy. The techniques discussed are illustrated using artificial and EUR/USD exchange rate data.
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Laurent, S., & Violante, F. (2012). Volatility forecasts evaluation and comparison. WIREs Computational Statistics. https://doi.org/10.1002/wics.190