Predicting exchange rate volatility: genetic programming versus GARCH and RiskMetrics
Abstract: This article investigates the use of genetic programming to forecast out-of-sample daily volatility in the foreign exchange market. Forecasting performance is evaluated relative to GARCH(1,1) and RiskMetrics? models for two currencies, the Deutsche mark and the Japanese yen. Although the GARCH and RiskMetrics? models appear to have an inconsistent marginal edge over the genetic program using the mean-squared-error (MSE) and R2 criteria, the genetic program consistently produces lower mean absolute forecast errors (MAE) at all horizons and for both currencies.
File(s): File format is application/pdf https://files.stlouisfed.org/files/htdocs/publications/review/02/05/43-54NeelyWeller.pdf
Provider: Federal Reserve Bank of St. Louis
Part of Series: Review
Publication Date: 2002