I read this paper


the two authors forecasts one day ahead gas price using, between the others, a GARCH model. How does this model works? Isn't a GARCH model useful just to forecast volatility? thank you!


1 Answer 1


You are right - GARCH model models volatility. They write: " The GARCH [27] can be used to model changes in the variance of the errors as a function of time."

What people often do is to fit an ARIMA model (that can be used to forecast a time series) and apply a GARCH model to the errors (which gives you a feeling for the forecast error). See Hyndman and Athana­sopou­los for a good, free online book on forecasting.


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