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Midpoint method and accuracy of variability forecasting

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Abstract

This study develops an alternative variability forecasting method, the midpoint method. This method, along with the interval computing and OLS lower and upper bound methods in the literature, is applied to predict variability in the stock market and mortgage rates. Results suggest that both the midpoint and interval computing methods can generate significantly higher accuracy in variability forecasts than the OLS lower and upper bound method. Nonetheless, the midpoint method requires less asymmetric distribution of input data than the interval computing.

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Authors and Affiliations

  1. Department of Economics and Finance, University of Central Arkansas, Conway, AR, 72035, USA

    Ling T. He

  2. Department of Computer Science, University of Central Arkansas, Conway, AR, 72035, USA

    Chenyi Hu

Authors
  1. Ling T. He
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  2. Chenyi Hu
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Correspondence to Ling T. He.

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He, L.T., Hu, C. Midpoint method and accuracy of variability forecasting. Empir Econ 38, 705–715 (2010). https://doi.org/10.1007/s00181-009-0286-6

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  • DOI: https://doi.org/10.1007/s00181-009-0286-6

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