Simulated Evidence on the Distribution of the Standardized One-Step-Ahead Prediction Errors in ARCH Processes

Applied Financial Economics Letters, Vol. 3, pp. 31-37, 2007

7 Pages Posted: 11 Nov 2007 Last revised: 1 Feb 2009

See all articles by Stavros Antonios Degiannakis

Stavros Antonios Degiannakis

Department of Economic and Regional Development, Panteion University of Political and Social Sciences

Evdokia Xekalaki

Athens University of Economics and Business

Abstract

In statistical modelling contexts, the use of one-step-ahead prediction errors for testing hypotheses on the forecasting ability of an assumed model has been widely considered. Quite often, the testing procedure requires independence in a sequence of recursive standardized prediction errors, which cannot always be readily deduced particularly in the case of econometric modelling. In this paper, the results of a series of Monte Carlo simulations reveal that independence can be assumed to hold.

Suggested Citation

Degiannakis, Stavros Antonios and Xekalaki, Evdokia, Simulated Evidence on the Distribution of the Standardized One-Step-Ahead Prediction Errors in ARCH Processes. Applied Financial Economics Letters, Vol. 3, pp. 31-37, 2007, Available at SSRN: https://ssrn.com/abstract=1028728

Stavros Antonios Degiannakis (Contact Author)

Department of Economic and Regional Development, Panteion University of Political and Social Sciences ( email )

136 Sygrou
Athens
Greece

Evdokia Xekalaki

Athens University of Economics and Business ( email )

76 Patission Street
GR-10434 Athens
Greece

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