M. Bildirici, Ozgur Omer Ersin
May 22, 2012
ERN: Neural Networks & Related Topics (Topic)
The Turkish version of this paper can be found at: http://ssrn.com/abstract=2222071 The study aims to investigate linear GARCH, fractionally integrated FI-GARCH and Asymmetric Power APGARCH models and their nonlinear counterparts based on Support Vector Regression (SVR) and Neural Network (NN) models. GARCH family models are extended to NN-GARCH architecture of Donaldson and Kamstra (1997) to various NN-GARCH family models (Bildirici and Ersin, 2009) such as NN-APGARCH model. The study aims to introduce a class of extended NN-GARCH and SVR-GARCH family of models with nonlinear augmentations in modeling both the conditional mean and variance. The SVR-GARCH, SVR-APGARCH and SVR-FIAPGARCH and their Multi-Layer Perceptron architecture based counterparts, MLP-GARCH, MLP-APGARCH and MLP-FIAPGARCH are evaluated. An application to daily returns in Istanbul ISE100 stock index is provided. Results suggest that volatility clustering, asymmetry and nonlinearity characteristics are modeled more efficiently with the models possessing neural network architectures.