Another GARCH forecasting topic

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Radu Fieraru
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Joined: Mon Apr 26, 2021 7:00 am

Another GARCH forecasting topic

Postby Radu Fieraru » Mon Apr 26, 2021 9:23 am

Hi. I hope you can help me with something short and simple (again I hope it is). I am working on a research paper about COVID-19 and its impact on the stock market. One part of my case study revolves around volatility. I know that due to COVID-19 there was a huge increase in march 2020 in volatility and I wish to compare it to forecasted volatility about how the market would have acted if there was no COVID-19 crisis.
My problem is that forecasting from a GARCH model (I tried multiple models and settings) will bring forecasted volatility much lower than the normal even without COVID.
Is there something I am doing wrong? Is there a better process for forecasting volatility? Would it be better to just compare the volatility from 2020 with a mean of yearly past volatility?
I have attached also a video and my wf1 file for anyone to tell me if I am doing something wrong.
Thank you very much for your help.

garch forecasting problem.png
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GARCH problem.rar
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