The Predictability of Non-Overlapping Forecasts: Evidence from a New Market
Multinational Finance Journal, Vol 15, no.1/2, pp.125-156, 2011
Posted: 7 Feb 2014
Date Written: 2011
This paper investigates the short-run forecasting performance, in the relatively new and fairly unresearched futures market of Greece. Forecasts from univariate (ARIMA) and multivariate (VAR, VECM and SURE-VECM) linear time-series models indicate that cash returns can be more accurately forecasted, for all forecast horizons, when forecast specifications contain information from both lagged cash and futures returns, than from specifications that utilize information only from lagged cash returns. On the other hand, futures return forecasts are not enhanced in accuracy when lagged cash returns are employed for almost all forecasts. This verifies that at almost all forecasting horizons futures returns contain significantly more and different information than that embodied in current cash returns. Moreover, all time-series models generate more accurate cash and futures forecasts than the forecasts obtained by the random walk model.
Keywords: Cointegration; VECM and ARIMA Models; Forecasting; Futures Markets; Emerging Markets; Predictability
JEL Classification: G13, G14, G15
Suggested Citation: Suggested Citation