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Evaluating density forecasts of the model with a conditional skewed-t distribution for China's stock markets

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  • Xiao-Ming Li
  • Qing Xu

Abstract

This study sets up a model which assumes a conditional skewed-t distribution for returns on four of China's stock price indexes (Shanghai A, Shanghai B, Shenzhen A and Shenzhen B). We employ Chen and Fan's (2004) pseudo-Wald test via the copula approach to evaluate both in- and out-of-sample density forecasts of the model. The results show that our model characterized by modelling conditional skewness and conditional kurtosis has a good in-sample fit as well as a good out-of-sample performance of density forecasting.

Suggested Citation

  • Xiao-Ming Li & Qing Xu, 2007. "Evaluating density forecasts of the model with a conditional skewed-t distribution for China's stock markets," Applied Financial Economics, Taylor & Francis Journals, vol. 18(3), pages 213-227.
    • Handle: RePEc:taf:apfiec:v:18:y:2007:i:3:p:213-227
    DOI: 10.1080/09603100601057896
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