A Comparison between Bayesian and Frequentist methods in Financial Volatility with Applications to Foreign Exchange Rates

Journal of Data Science

article

Steve S. Chung¹  Jalen Harris¹  Christopher Newmark¹  Diana Yeung² 

[1] Department of Mathematics, California State University;Department of Mathematics, University of Notre Dame

关键词: Bayesian;    Financial time series;    Foreign exchange rates;    Frequentist;    Volatility;   

DOI  :  10.6339/JDS.201907_17(3).0008

学科分类：土木及结构工程学

来源: JDS

【 摘 要 】

In this paper, a comparison is provided for volatility estimation in Bayesian and frequentist settings. We compare the predictive performance of these two approaches under the generalized autoregressive conditional heteroscedasticity (GARCH) model. Our results indicate that the frequentist estimation provides better predictive potential than the Bayesian approach. The finding is contrary to some of the work in this line of research. To illustrate our finding, we used the six major foreign exchange rate datasets.

【 授权许可】

CC BY