13713 17 70116 4 193619 document 70116 FORECASTING GLOBAL EQUITY INDICES USING LARGE BAYESIAN VARS.pdf application/pdf 1ea99cd6c40f539ab565c52a92b1745f MD5 325968 2016-08-16 06:22:11 https://pure.iiasa.ac.at/id/eprint/13713/1/FORECASTING%20GLOBAL%20EQUITY%20INDICES%20USING%20LARGE%20BAYESIAN%20VARS.pdf 13713 1 1 application/pdf text en public cc_by_nc

FORECASTING GLOBAL EQUITY INDICES USING LARGE BAYESIAN VARS.pdf

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http://eprints.org/relation/isVersionOf https://pure.iiasa.ac.at/id/document/70116 http://eprints.org/relation/isVolatileVersionOf https://pure.iiasa.ac.at/id/document/70116 http://eprints.org/relation/issmallThumbnailVersionOf https://pure.iiasa.ac.at/id/document/70116 archive 353 disk0/00/01/37/13 2016-08-16 06:24:38 2021-08-27 17:27:36 2016-08-16 06:24:52 article show Huber F. Krisztin T. 2088 0000-0002-9241-8628 Piribauer P. pub prog_esm BVAR; equity indices; forecasting; log-scores; stochastic volatility; C11; C22; C53; E17; G11 This paper proposes a large Bayesian Vector Autoregressive (BVAR) model with common stochastic volatility to forecast global equity indices. Using a monthly dataset on global stock indices, the BVAR model controls for co-movement commonly observed in global stock markets. Moreover, the time-varying specification of the covariance structure accounts for sudden shifts in the level of volatility. In an out-of-sample forecasting application we show that the BVAR model with stochastic volatility significantly outperforms the random walk both in terms of point as well as density predictions. The BVAR model without stochastic volatility, on the other hand, shows some merits relative to the random walk for forecast horizons greater than six months ahead. In a portfolio allocation exercise we moreover provide evidence that it is possible to use the forecasts obtained from our model with common stochastic volatility to set up simple investment strategies. Our results indicate that these simple investment schemes outperform a naive buy-and-hold strategy. 2017-07-10 published Wiley-Blackwell 10.1111/boer.12094 167 public Bulletin of Economic Research 69 3 288-308 TRUE 03073378 FALSE no info:eu-repo/semantics/article