In this paper we show that the conditional variance of the GARCH(1,1) model is a measure that usually overstimates the magnitude of volatility in time series.

In this paper we investigate the profitability of non-linear trading rules based on nearest neighbour (NN)predictors. Applying this investment strategy to the New York Stock Exchange, our results suggest that, taking into account transaction costs, the NN-based trading rule is superior to both a...