Conventional measures of the risk of a financial asset make use of the unobserved (conditional) variance or standard deviation of its return. In this paper, we treat the observed absolute return as a measure of risk and explore its forecastability. Two simple models are considered. One is a new...

The range of daily asset prices is often used as a measure of volatility. Using a CARRX (conditional autoregressive range with exogenous variables) model, and the parsimony principle, the paper investigates the factors affecting the volatilities of Asian equity markets. Since the beginning of...

Developing economies often impose restrictions on foreign direct investment (FDI). In recent years many developing economies liberalize external trade as well as FDI inflows. The economists have neglected the importance of government policies on economic performance until recently. This paper...

Assume that observations are generated from nonstationary autoregressive (AR) processes of infinite order. We adopt a finite-order approximation model to predict future observations and obtain an asymptotic expression for the mean-squared prediction error (MSPE) of the least squares predictor....