Out‐of‐sample volatility prediction: A new mixed‐frequency approach

To obtain market average return, investment managers need to construct index tracking portfolio to replicate target index. Currently, most literatures use financial data that has homogenous frequency when constructing the index tracking portfolio. To make up for this limitation, we propose a methodology based on mixed-frequency financial data, called FACTOR-MIDAS-POET model. The proposed model can utilize the intraday return data, daily risk factors data and monthly or quarterly macro economy data, simultaneously. Meanwhile, the out-of-sample analysis demonstrates that our model can improve the tracking accuracy.

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Predicting Korean Stock Market Return with Financial and Macro variables - Focusing on In-sample and Out-of-sample Tests -

Journal of Insurance and Finance ◽

10.23842/jif.2020.31.1.003 ◽

2020 ◽

Vol 31 (1) ◽

pp. 87-113

Author(s):

Sungju Chun

Keyword(s):

Stock Market ◽

Market Return ◽

Stock Market Return ◽

Korean Stock Market ◽

Out Of Sample ◽

Macro Variables

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Optimal Hedge Ratio and Hedging Effectiveness in Stock Futures Market: Evidence from National Stock Exchange, India

Restaurant Business ◽

10.26643/rb.v118i3.7637 ◽

2019 ◽

Vol 118 (3) ◽

pp. 137-152

Author(s):

A. Shanthi ◽

R. Thamilselvan

Keyword(s):

Banking Sector ◽

Stock Exchange ◽

Research Work ◽

Futures Market ◽

Least Square ◽

Time Varying ◽

Hedge Ratio ◽

Hedging Effectiveness ◽

Out Of Sample ◽

Optimal Hedge

The major objective of the study is to examine the performance of optimal hedge ratio and hedging effectiveness in stock futures market in National Stock Exchange, India by estimating the following econometric models like Ordinary Least Square (OLS), Vector Error Correction Model (VECM) and time varying Multivariate Generalized Autoregressive Conditional Heteroscedasticity (MGARCH) model by evaluating in sample observation and out of sample observations for the period spanning from 1st January 2011 till 31st March 2018 by accommodating sixteen stock futures retrieved through www.nseindia.com by considering banking sector of Indian economy. The findings of the study indicate both the in sample and out of sample hedging performances suggest the various strategies obtained through the time varying optimal hedge ratio, which minimizes the conditional variance performs better than the employed alterative models for most of the underlying stock futures contracts in select banking sectors in India. Moreover, the study also envisage about the model selection criteria is most important for appropriate hedge ratio through risk averse investors. Finally, the research work is also in line with the previous attempts Myers (1991), Baillie and Myers (1991) and Park and Switzer (1995a, 1995b) made in the US markets

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