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International Journal of Forecasting
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License: Elsevier Non-Commercial
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International Journal of Forecasting
Article . 2016 . Peer-reviewed
License: Elsevier TDM
Data sources: Crossref
SSRN Electronic Journal
Article . 2014 . Peer-reviewed
Data sources: Crossref
SSRN Electronic Journal
Article . 2015 . Peer-reviewed
Data sources: Crossref
EconStor
Research . 2014
Data sources: EconStor
EconStor
Research . 2015
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Score Driven Exponentially Weighted Moving Average and Value-at-Risk Forecasting

Authors: Lucas, André; Zhang, Xin;

Score Driven Exponentially Weighted Moving Average and Value-at-Risk Forecasting

Abstract

We present a simple methodology for modeling the time variation in volatilities and other higher-order moments using a recursive updating scheme that is similar to the familiar RiskMetrics approach. The parameters are updated using the score of the forecasting distribution, which allows the parameter dynamics to adapt automatically to any non-normal data features, and increases the robustness of the subsequent estimates. The new approach nests several of the earlier extensions to the exponentially weighted moving average (EWMA) scheme. In addition, it can be extended easily to higher dimensions and alternative forecasting distributions. The method is applied to Value-at-Risk forecasting with (skewed) Student's t distributions and a time-varying degrees of freedom and/or skewness parameter. We show that the new method is as good as or better than earlier methods for forecasting the volatility of individual stock returns and exchange rate returns.

Country
Netherlands
Keywords

integrated generalized autoregressive score models, dynamic volatilities; dynamic higher-order moments; integrated generalized autoregressive score models; Exponentially Weighted Moving Average (EWMA); Value-at-Risk (VaR), time varying higher order moments, Exponential Weighted Moving Average (EWMA), SDG 16 - Peace, Value-at-Risk (VaR), ddc:330, dynamic volatilities, time varying higher order moments, integrated generalized autoregressive score models, Exponential Weighted Moving Average (EWMA), Value-at-Risk (VaR), G15, Justice and Strong Institutions, dynamic volatilities, C51, C52, dynamic higher-order moments, C53, Exponentially Weighted Moving Average (EWMA), jel: jel:C52, jel: jel:C53, jel: jel:C51, jel: jel:G15

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
34
Top 10%
Top 10%
Top 10%
hybrid