Cross-Border Exchanges and Volatility Forecasting

Forthcoming in Quantitative Finance, 2018

30 Pages Posted: 2 Aug 2018

See all articles by Abhinav Goyal

Abhinav Goyal

University College Cork

Vasileios Kallinterakis

University of Liverpool - Management School (ULMS)

Dimos S Kambouroudis

University of Stirling - Department of Accounting and Finance

Jason Laws

University of Liverpool - Accounting and Finance Division

Date Written: January 14, 2018

Abstract

We test for the performance of a series of volatility forecasting models (GARCH 1,1; EGARCH 1,1; CGARCH) in the context of several indices from the two oldest cross-border exchanges (Euronext; OMX). Our findings overall indicate that the EGARCH (1,1) model outperforms the other two, both before and after the outbreak of the global financial crisis. Controlling for the presence of feedback traders, the accuracy of the EGARCH (1,1) model is not affected, something further confirmed for both the pre and post crisis periods. Overall, ARCH effects can be found in the Euronext and OMX indices, with our results further indicating the presence of significant positive feedback trading in several of our tests.

Keywords: volatility forecasting; exchange groups; feedback trading; global financial crisis

JEL Classification: G01; G02; G15; G17

Suggested Citation

Goyal, Abhinav and Kallinterakis, Vasileios and Kambouroudis, Dimos S and Laws, Jason, Cross-Border Exchanges and Volatility Forecasting (January 14, 2018). Forthcoming in Quantitative Finance, 2018, Available at SSRN: https://ssrn.com/abstract=3213807

Abhinav Goyal (Contact Author)

University College Cork ( email )

O'Rahilly Building
College Road
Cork
Ireland
+353 (0)21 490 2839 (Phone)

Vasileios Kallinterakis

University of Liverpool - Management School (ULMS) ( email )

Chatham Street
Liverpool, L69 7ZH
United Kingdom

Dimos S Kambouroudis

University of Stirling - Department of Accounting and Finance ( email )

Stirling, Scotland FK9 4LA
United Kingdom

Jason Laws

University of Liverpool - Accounting and Finance Division ( email )

United Kingdom

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