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Practice-oriented model selection in Forex market

Dai, L and Zhou, Peng 2016. Practice-oriented model selection in Forex market. International Journal of Economics & Management Sciences 5 (6) , 1000383. 10.4172/2162-6359.1000383

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Abstract

Most of the theoretical and empirical literatures are dedicated to selecting a more empirically sound model in economics and finance. When choosing from competing alternatives, the most popular criterion is econometric goodness of fit of models against structured data (cross-sectional, time-series and panel). It is the data that determines whether a theory is valid or not, but in many scenarios, structured data are not available or not precise measures of the reality. Therefore, this paper attempts to propose a complementary criterion in model selection in terms of investment practice—we are not trying to find an econometrically “true” model, but a practically useful model. A series of models are examined by the latest data in the FOREX market. Monetary CAPM turns out to be the “best” model for practical purpose.

Item Type: Article
Date Type: Published Online
Status: Published
Schools: Business (Including Economics)
Uncontrolled Keywords: Forex market; Model selection; Practice oriented criterion; Multivariate-Garch-in-Mean; Portfolio management
Publisher: World Academy of Science, Engineering and Technology
ISSN: 2162-6359
Date of First Compliant Deposit: 16 December 2016
Date of Acceptance: 17 November 2016
Last Modified: 06 Sep 2017 15:56
URI: http://orca.cf.ac.uk/id/eprint/96961

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