Journal Press India^®

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The main objective of the present study is to select the best model for forecasting the volatility of log return series of six indices. Scholars have emanated with passel of models for volatility forecasting. Present study is an attempt to test various volatility prediction models especially the combination models by comparing data on Nifty and Sensex with four other market indices from USA, UK, Hongkong and France. Twelve models, including six traditional models, two GARCH models and four combination models are implemented on the six indices, namely Nifty, Sensex, S&P 500, FTSE100, Hongkong’s Hangseng and France’s CAC40. In conclusion the MAE or RMSE measures preferred TGARCH (1,1) than GARCH (1,1) as well as the traditional models for majority (four out of six) of the markets. Combination models were also the preferred models for Nifty and CAC40 thereby indicating that there is a dearth of forthright rejection for these models.

Keywords

Volatility, GARCH, TGARCH, Index, Stock Market, Combination models

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