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| Author: | Brooks, R.D. Faff, R.W. McKenzie, M. |
| Title: | Time varying country risk: an assessment of alternative modelling techniques |
| Journal: | European Journal of Finance
2002 : SEP, VOL. 8:3, p. 249-274 |
| Index terms: | Stock markets International Statistical methods Models |
| Language: | eng |
| Abstract: | This paper investigates three different techniques for the estimation of a time-varying beta: a bivariate GARCH model, the Schwert and Seguin approach, and the Kalman filter method. These approaches are applied to a set of monthly Morgan Stanley country index data over the period 1970 to 1995 and their relative performances compared. In-sample forecast tests of the performance of each of these methods for generating conditional beta suggest that the GARCH-based estimates of risk generate the lowest forecast error although these are not necessarily significantly less than those generated by the other techniques considered. |
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