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Questions tagged [forecasting]

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13 views

Correctly predicting stock returns with GARCH in Python

I have seen this post: Correctly applying GARCH in Python which shows how to correctly apply GARCH models in Python using the arch library. Now I am wondering how I ...
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0answers
63 views

Why does computing correlation between index levels vs. percentage changes yield completely different results?

I am examining the relationship between the S&P 500 and the Industrial Production Index. Computing the correlation between these these variables yield vastly different results if expressed in ...
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0answers
62 views

Comparison of normalization methods on market returns

I am looking to use a multi-factor model to make target-return predictions. Since the factor-returns come from different scales I need to normalize first. There are different ways to normalize ...
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0answers
22 views

Forecasting time series data using auxiliary information and associated questions

Suppose I want to forecast MSFT time series, using MSFT history as well as SPY history. Are there good time series forecasting methods that permit auxiliary data to be used? Perhaps you should just ...
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3answers
70 views

Filling a few missing data in time series?

I'm writing a paper about Uncertainty indices like VIX, etc. I already collected all data but it seems that some of the variables got a few or a little more missing data. I have daily and monthly data ...
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0answers
22 views

Combining two returns forecasts of different lengths

Hi Quantitative Finance stack exchange, I'm analyzing a price process. I've made two forecasts, namely $Ret_{\text{10min}}$ = the return after 10 mins and $Ret_{\text{20min}}$ = the return after 20 ...
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1answer
70 views

What is the optimal approach to “backcasting” alternative asset classes (i.e. PE, Hedge Funds, Real Estate)?

I am interested in coming up with better risk calculations for alternative asset classes. As these are illiquid, not a lot of historical data is available. My idea is to use performance of stocks ...
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1answer
92 views

Why is the expected value of bias statistic one?

I have been reading about factor models recently. One of the ways in which the developer of these models (Barra/ Axioma) measure the accuracy of their models is by calculating the bias statistic for ...
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1answer
28 views

How to interpret the accuracy result of the forecaste?

I'm trying to forecast the vacancy rate of multifamily rental property. I have the data from 1992 until today. I'm trying to fit a model with the serie without the last 2 observations. I only need ...
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0answers
26 views

HAR RV h steps ahead formula

In the formula for HAR RV (or variants) (Corsi (2009) ref) for h steps ahead the only parameter that depends from h is the error. Am I to assume that the only difference between the h=1 model and the ...
2
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1answer
107 views

How to interpret and define statistics of GBM output

I am trying to model the future prices of a number of commodities. For this, I am applying geometric Brownian motion, writing a Monte Carlo code in Python. Given that I want to estimate tommorows ...
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0answers
42 views

Probability of outlier events for laplace distribution

I've read that the laplace distribution is better for forecasting purposes than the normal distribution due to it better accounting for fat tails. However, when I run the numbers in matlab, laplace ...
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0answers
62 views

What is the purpose of short rate models?

Just venturing into quantitative finance and studying short rate models (Vasicek, CIR, Hull-White etc.). Wanted to ask a very simple intuitive question. How would a practitioner use these models? I ...
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0answers
22 views

fixed forecast and rolling forecast model discrepancy

I am working on a project related to S&P 500. I have two years of data. The fix strategy is divided two parts. train on 1st year and test on second year. The rolling is to train on the first 6 ...
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0answers
52 views

Coding Forecast using Sarima in Matlab

Good day. I have 112 observation of a seasonal data. Using the software E-Views, I obtain the sarima model Sarima(0,2,1)(0,2,1)[12]. My problem is "what is code in forecasting using matlab of the ...
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1answer
66 views

Bond asset class long term assumptions [closed]

How are long term capital market expectations set in the industry? I'm looking to get some pointers about setting long term assumptions for fixed income asset classes like global high yield credit, ...
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1answer
123 views

Accuracy for GARCH models

How does one calculate the accuracy of forecasts given by GARCH models considering GARCH is run on returns. Assuming GARCH is a derivative of a regression based prediction model, would regular ...
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0answers
24 views

Chances a forecasting model exceeds/deceeds a specified threshold

I am interested in determining the confidence of a forecasting model with applications to quantitative finance. I have the following multivariate data $X$: \begin{align} X(t) \sim F_{X}(t) \end{...
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0answers
110 views

Using the n-ahead function in R?

I am trying to use the one-step ahead forecasting method using my time series data (Called difflog.BC in my code). I have the following model which i am able to plot: ...
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4answers
2k views

Why are stock index futures not used to forecast how much the stock market will rise, given that interest rates futures are used for this purpose?

In news articles, the reader often read interest rates forecasts calculated based on interest rate futures. An example is here; How did traders calculate that the expected number of rate hikes is 4 ...
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0answers
44 views

Applicability of econometric models in forecating one-month ahead covariance matrices

For example, in the paper A Test of Covariance-Matrix Forecasting Methods, Zakamulin (2015) forecasts monthly covariance matrices by multivariate GARCH models from daily data. He does this by making ...
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0answers
151 views

GARCH(1,1) Forecasting

My goal: I want to do in-sample forecasts of 22 days volatility (sum of squared returns) using a GARCH (1,1) model (rugarch package). I want to do this by forecasting daily volatility $n$ steps ahead (...
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0answers
44 views

Minimum Lower Partial Moment (n=2) hedging ratio

I would like to better have understanding on the minimum-LPM hedging. I have understood that the co-LPM matrix cannot be modeled by GARCH type models that are used to estimate to the covariance matrix,...
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0answers
28 views

How do I apply Fuzzy-GARCH to forecast real data?

I am currently working on fuzzy-GARCH to forecast. I would like to know how this can be done starting from scratch using an example (including obtaining consequent parameters). Next, how do I get two ...
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0answers
107 views

How to find a probability of VIX moving from one price to another

I asked a similar question on here with a bounty. I decided to modify the question to simplify what I am trying to do. Is there a package on MATLAB or some other tool where I can find the probability ...
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2answers
93 views

Does forecasting asset returns by default assumes non-stationarity of asset returns?

If we assume the assets returns are stationary then the best forecast can only be the mean of the distribution. But if we assume non-stationarity we are forecasting the mean parameter (assuming ...
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1answer
71 views

$R^{2}$ Measure for Functions (Yield Curves)

I am used to applying $R^{2}$ (relative explained variance) as a measure for point estimates. I am now confronted with forecasting the whole of the yield curve and would like to see what fraction of ...
11
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4answers
599 views

Why (most) quants think that the risk-neutral measure should not be used for financial forecasting?

In posts regarding the $\mathbb{P}$ vs $\mathbb{Q}$ debate (see 1, 2, 3 or 4), most answers seem to conclude that historical-based methods are better suited than risk-neutral models for financial ...
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0answers
68 views

Is there a mathematical way of showing the slowing down of economic markets?

I'm currently taking a introductory mathematical finance course in university and recently on the news (BBC, etc), it states that the economic markets are shown to be slowing down for the next few ...
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0answers
23 views

rugarch Sigma Band

Can someone give me a high-level explanation as to how the unconditional 1-sigma band is calculated in ugarchforecast, how to interpret the results of this band, and how it differs from ugarchpath? Is ...
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0answers
85 views

What is a good algorithm to predict volatility in metals commodity markets? [closed]

I'm trying to create a script to predict major swings in the price of Aluminium. I am trying to implement a dynamic time warping algorithm for the same. Was wondering if this really is the best ...
1
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1answer
295 views

How to know if a time series is trending or mean reverting?

I came across Michael Halls-Moore article on using the Hurst exponent test to determine if a price time-series is mean-reverting, trend-following or closer to a random walk, but doesn't this disregard ...
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2answers
1k views

Can I forecast stock returns using GARCH?

I know this is a rookie question, but I have seen some comments about using GARCH to forecast stock returns. Is it something people do? Wasn't GARCH just for volatility? Also, can you suggest any (...
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0answers
89 views

Wavelet transform (the à trous time-based decomposition) in R

I urgently need to know how to apply the 'à trous' time-based decomposition in R [also known as Stationary Wavelet Transform] on a time series as a preprocessing, to use the result in forecasting and ...
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0answers
71 views

Monte Carlo volatily

I was wondering if we could do a forecast on volatility using monte carlo on an underlying asset. For example EUR/USD : Simulating a lot of possible paths on 1 year then calculate the volatilty for ...
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0answers
78 views

What are the current gold standards for volatility prediction error?

I'm working on volatility forecasting models for equities and currencies. I am using daily data and am interested in producing forecasts for the next n days. To ...
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1answer
145 views

Most GUI user friendly Time series Econometrics software for modelling and Forecasting GARCH models [closed]

I think the question is simple enough. I have been using Eviews, but it is unable to do recursive one step ahead forecasting directly and requires me to use coding, which I'm not very good at. I need ...
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1answer
94 views

Low-rank approximation techniques for portfolio optimisation

I am trying to understand how low-rank approximation techniques such as PCA, factor analysis, total least squares, orthogonal regression, etc could be used in portfolio optimisation. Say I have a ...
0
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1answer
285 views

Trouble understanding lookahead bias

I understand lookahead bias is pretty common industry knowledge. But I cannot wrap my head around how I am introducing it and could use a nice and easy explanation. Here's my thought process. I have $...
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0answers
809 views

QLIKE loss function to evaluate forecasting model of log(realized volatility)

I use QLIKE as loss function to evaluate the forecasting performance of a RV realized volatility model. QLIKE = log $h$ + $\frac{\hat{\sigma}^2}{h}$ where $h$ is volatility forecast and $\hat{\sigma}...
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3answers
182 views

How is a GARCH model readily complementary to a forecasting model?

Hi Quantitative Finance Stack Exchange, It's my first go at GARCH models so give me a chance with my phrasing. I'm looking for an answer to a general question. First, I understand that you can have ...
3
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1answer
105 views

Are GARCH models dependent on the returns forecasting model?

Hi Quantitative Fiance Stack Exchange, It's my first go at GARCH models so please give me a chance with my phrasing. I understand that GARCH models are used to forecast volatility. The GARCH(1,1) ...
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0answers
44 views

How to reduce data dependence for empirically assessing option pricing model performance?

I am preparing a paper about mitigating assessment failures for option pricing models. For the sake of simpliciy, suppose we are talkin about European options. In basic terms, what I would like to say ...
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1answer
107 views

Combine EWMA or ARCH model with estimator other than squared returns

Currently I use the EWMA model with the squared logarithmic returns as proxy estimator for the volatility, in order to forecast the volatility one step ahead in an intraday scenario (time frame is a ...
3
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1answer
376 views

Please advice free Java library for classical time series forecasting

I've got an ARIMA model (with a GARCH model for variance estimation) and parameters estimated in Matlab for my set of data. Now I need to use this model in my Java based application for making ...
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0answers
113 views

ARIMA prediction for currencies

I was browsing TradingEconomics.com and I came across their forecast models which immediately captivated my interest. They describe them as "projected using an autoregressive integrated moving average ...
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1answer
641 views

What is a maximal curve?

I came across the term maximals in this article. Can someone explain what a maximal curve is and how you would calculate it?
3
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1answer
209 views

Consensus Forecast Data for NFP

Does anybody know where I can get historical consensus forecast data for Non-forma Payroll (NFP)? Or any forecast data for NFP. Thanks,
3
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1answer
174 views

Data of Credit Migration Matrices

Please advise that how to get the data of credit migration matrices There is a paper of credit migration matrices, I would import the data to Matlab or R for credit analysis. https://www....
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0answers
194 views

Relationship between in-sample and out-sample periods length

I have two general questions regarding "in-sample fitting vs. out-of-sample backtesting" kind of analyses. Is there any relationship between the length of the data collected for in-sample fitting ($a$)...