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All Journal Zero : Jurnal Sains, Matematika, dan Terapan
Nugroho, Didit Budi
Universitas Kristen Satya Wacana, Indonesia
Agriculture, Biological Sciences & Forestry Chemistry Mathematics Physics

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Modeling and Forecasting Volatility through EGARCH-X and EGARCH-CJ Models Nugroho, Didit Budi; Putri, Benita Dwitya; Susanto, Bambang
ZERO: Jurnal Sains, Matematika dan Terapan Vol 9, No 3 (2025): Zero: Jurnal Sains Matematika dan Terapan
Publisher : UIN Sumatera Utara

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.30829/zero.v9i3.26532

Abstract

This study compares the performance of EGARCH-X and EGARCH-CJ models in forecasting financial market volatility using daily TOPIX data (2004-2011). Model parameters were estimated using an efficient Bayesian MCMC framework. The results indicate that the EGARCH-CJ model, which decomposes volatility into continuous and jump components, provides a superior in-sample fit. More importantly, in out-of-sample forecasting, the EGARCH-CJ model demonstrates significantly better accuracy for medium- and long-term horizons (e.g., MSE reductions up to 30% at the 5-day horizon, with significant Diebold-Mariano statistics). In contrast, the standard EGARCH model remains more effective for short-term forecasts. These findings underscore the importance of explicitly modeling jump dynamics for medium-term risk management in the Japanese stock market, offering valuable insights for financial modelers and risk managers.
Co-Authors Putri, Benita Dwitya Susanto, Bambang