THE PREDICTIVE ABILITY OF SEVERAL MODELS OF EXCHANGE-RATE VOLATILITY

We compare the out-of-sample forecasting performance of univariate hom oskedastic, GARCH autoregressive, and nonparametric models for conditi onal variances, using five bilateral weekly exchange rates for the dol lar, 1973-1989. For a one-week horizon, GARCH models tend to make slig htly more accurate forecasts. For longer horizons, it is difficult to find grounds for choosing between the various models. None of the mode ls perform well in a conventional test of forecast efficiency.