Abstract
The present study attempts to evaluate and analyze the insample fit and out-sample fit forecasting performance of
the high/low beta portfolio returns based on the specific to
general approach of the EGARCH model respectively. The
researcher has attempted to construct daily 10 equally
weighted beta (β) portfolios (10 stocks each) to test
forecastability of portfolio returns volatilities for the time
period of July 2000 to June 2016 respectively. Based on the
specific-to-general approach employed in the ARMA (1,
0)-EGARCH (1, 1) model, the estimation results of the
model considers the general approach superior over the
specific approach. The findings of the in-sample fit and the
out-sample fit forecasting performances of the high/low
beta portfolio returns volatilities have shown that the root
mean square error and the mean absolute error and its bias
proportions are the efficient forecasting error measures to
model and evaluate the in-sample fit and the out-sample fit
forecasting performances of the low-beta portfolio returns
respectively. The present study tends to be beneficial for
the investors for investment decisions and also for the
macro-economic policy makers for construction of
portfolios, valuation of securities and risk management
respectively.
Dr. Fauzia Mubarik, Dr. Attiya Yasmin Javid, Adnan Ali khan. (2017) Analysis of forecastability of Portfolio Returns Volatility: Evidence from Pakistani Stock Market, Paradigms , Vol 11, Issue 2 .
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