Predicting BIST-100 price dynamics with different GARCH and SV models

Öz

This study performs a comparative analysis of various GARCH and stochastic volatility (SV) models using the BIST 100 index. The models we examine include traditional GARCH (1,1) models and SV models with an AR (1) log-volatility process. Additionally, we consider more flexible models that incorporate jump components, volatility-in-mean, leverage effects, and innovations following a t-distribution or a moving average. The empirical findings reveal the following findings: (1) Stochastic Volatility (SV) models generally demonstrate better performance when compared to their GARCH counterparts. (2) The inclusion of a jump component and innovations following a t-distribution notably enhances the performance of the standard GARCH model while having less impact on the SV model. (3) The presence of a volatility feedback channel appears to be unnecessary. (4) Adding a moving average component does not improve the goodness of fit for both the GARCH and SV models. (5) The leverage effect is found to be crucial in modeling the BIST 100 index. Overall, the SV-t model has the most favorable performance among other peer models.

Anahtar Kelimeler

• BIST 100
• GARCH
• Stochastic Volatility Model
• Volatility

BIST-100 fiyat dinamiğinin farklı GARCH ve SV modelleri ile tahmin edilmesi

Öz

Bu çalışma, BIST 100 endeksini kullanarak çeşitli GARCH ve stokastik volatilite (SV) modellerinin karşılaştırmalı analizini gerçekleştirmektedir. İncelenen modeller arasında geleneksel GARCH (1,1) modelleri ve AR (1) log-volatilite sürecine sahip SV modelleri bulunmaktadır. Ek olarak, sıçrama bileşeni, ortalama içinde volatilite, kaldıraç etkisi, t dağılımını veya hareketli ortalamayı takip eden yenilikleri içeren daha esnek modeller de çalışma kapsamında kullanılmıştır. Elde edilen ampirik bulgular özetle şu şekildedir: (1) SV modelleri, GARCH modelleri ile karşılaştırıldığında genellikle daha iyi performans göstermektedir. (2) Bir sıçrama bileşeninin ve bir t-dağılımı sonrasındaki yeniliklerin dahil edilmesi, standart GARCH modelinin performansını belirgin şekilde artırırken, SV modeli üzerinde daha az etkiye sahiptir. (3) Volatilite geri bildirim kanalının baz modele eklenmesi model performansında anlamlı bir iyileşmeye neden olmamıştır. (4) Baz modellere hareketli ortalama bileşeninin eklenmesi gerek GARCH modelinde gerekse de SV modelinde anlamlı bir iyileşme sağlamamıştır. (5) Kaldıraç etkisinin modele dahil edilmesi BIST 100 fiyat endeksinin tahmininde önemli iyileşme sağlamıştır. BIST 100 volatilite tahmininde en başarılı model SV-t modelidir.

Anahtar Kelimeler

• BIST 100
• GARCH
• Stokastik Volatilite Modeli
• Volatilite

Kaynakça

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