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Browsing Artículos de Revistas by Author "Hardy, Nicolás"
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Item “Go Wild for a While!”: A New Test for Forecast Evaluation in Nested Models.(MDPI, 2021-09-21) Pincheira, Pablo; Hardy, Nicolás; Muñoz, FelipeIn this paper, we present a new asymptotically normal test for out-of-sample evaluation in nested models. Our approach is a simple modification of a traditional encompassing test that is commonly known as Clark and West test (CW). The key point of our strategy is to introduce an independent random variable that prevents the traditional CW test from becoming degenerate under the null hypothesis of equal predictive ability. Using the approach developed by West (1996), we show that in our test, the impact of parameter estimation uncertainty vanishes asymptotically. Using a variety of Monte Carlo simulations in iterated multi-step-ahead forecasts, we evaluated our test and CW in terms of size and power. These simulations reveal that our approach is reasonably well-sized, even at long horizons when CW may present severe size distortions. In terms of power, results were mixed but CW has an edge over our approach. Finally, we illustrate the use of our test with an empirical application in the context of the commodity currencies literatureItem The predictive power of stock market’s expectations volatility: A financial synchronization phenomenon(Public Library of Science, 2021-05-20) Magner, Nicolás; Lavin, Jaime F.; Valle, Mauricio; Hardy, NicolásWe explore the use of implied volatility indices as a tool for estimate changes in the synchronization of stock markets. Specifically, we assess the implied stock market’s volatility indices’ predictive power on synchronizing global equity indices returns. We built the correlation network of 26 stock indices and implemented in-sample and out-of-sample tests to evaluate the predictive power of VIX, VSTOXX, and VXJ implied volatility indices. To measure markets’ synchronization, we use the Minimum Spanning Tree length and the length of the Planar Maximally Filtered Graph. Our results indicate a high predictive power of all the volatility indices, both individually and together, though the VIX predominates over the evaluated options. We find that an increase in the markets’ volatility expectations, captured by the implied volatility indices, is a good Granger predictor of an increase in the synchronization of returns in the following month. Estimating, monitoring, and predicting returns’ synchronization is essential for investment decision-making, especially for diversification strategies and regulating financial systems.