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Forecasting the Volatilities of Philippine Stock Exchange Composite Index Using the Generalized Autoregressive Conditional Heteroskedasticity Modeling

Novy Ann M. Etac, Roel F. Ceballos

Abstract



This study was conducted to find an appropriate statistical model to forecast the volatilities of PSEi using the model Generalized Autoregressive Conditional Heteroskedasticity (GARCH). Using the R software, the log returns of PSEi is modeled using various ARIMA models and with the presence of heteroskedasticity, the log returns was modeled using GARCH. Based on the analysis, GARCH models are the most appropriate to use for the log returns of PSEi. Among the selected GARCH models, GARCH (1,2) has the lowest AIC value and also has the highest LL value implying that GARCH (1,2) is the best model for the log returns of PSEi.

Keywords


Time Series Analysis, Philippine Stock Exchange (PSEi), Volatility, Generalized Autoregressive Conditional Heteroskedasticity Modeling (GARCH), R

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