The Predictive Performance of Asymmetric Normal Mixture GARCH in Risk Management: Evidence from Turkey

Yıl 2007, Cilt: 1 Sayı: 1, 7 - 33, 01.06.2007

Atilla Çifter Alper Özün

Öz

The purpose of this study is to test predictive performance of Asymmetric Normal Mixture GARCH (NMAGARCH) and other GARCH models based on Kupiec and Christoffersen tests for Turkish equity market. The empirical results show that the NMAGARCH perform better based on %99 CI out-of-sample forecasting Christoffersen test
where GARCH with normal and student-t distribution perform better based on %95 Cl out-of-sample forecasting Christoffersen test and Kupiec test. These results show
that none of the model including NMAGARCH outperforms other models in all cases as trading position or confidence intervals and the real implications of these results for
Value-at-Risk estimation is that volatility model should be chosen according to confidence interval and trading positions. Besides, NMAGARCH increases predictive performance for higher confidence internal as Basel requires. 

Anahtar Kelimeler

GARCH, Asymmetric Normal Mixture GARCH, Christoffersen Test, Emerging Markets

Risk Yönetiminde Asimetrik Normal Karma GARCH Modelinin Öngörü Performansı: Türkiye Uygulaması

Öz

The purpose of this study is to test predictive performance of Asymmetric Normal Mixture GARCH (NMAGARCH) and other GARCH models based on Kupiec and Christoffersen tests for Turkish equity market. The empirical results show that the NMAGARCH perform better based on %99 CI out-of-sample forecasting Christoffersen test where GARCH with normal and student-t distribution perform better based on %95 Cl out-of-sample forecasting Christoffersen test and Kupiec test. These results show that none of the model including NMAGARCH outperforms other models in all cases as trading position or confidence intervals and the real implications of these results for Value-at-Risk estimation is that volatility model should be chosen according to confidence interval and trading positions. Besides, NMAGARCH increases predictive performance for higher confidence internal as Basel requires. 

Anahtar Kelimeler

GARCH, Asimetrik Normal Karma GARCH, Christoffersen Testi, Gelişmekte Olan Piyasalar

Kaynakça

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