GAS or GARCH: A comparison of density and VaR forecasts  in Turkish FX and stock markets

Özgül, Ali

doi:https://dx.doi.org/10.26650/ibr.2025.54.1577152

Research Article

DOI :10.26650/ibr.2025.54.1577152 IUP :10.26650/ibr.2025.54.1577152 Full Text (PDF)

GAS or GARCH: A comparison of density and VaR forecasts in Turkish FX and stock markets

This paper compares the renowned GARCH model with a novel one, the Generalized Autoregressive Score (GAS) model in terms of forecasting performance. Considering the gap in the literature, this study focuses on the Turkish stock and FX markets. The analysis covers 25 years (1999-2023), of which the last 12 constitute the out-of-sample period. The selected indexes largely represent the finance (XBANK) and industry (XUSIN) sectors and the entire (XUTUM) economy, while the fourth (XU100) is the market benchmark. Likewise, FX rates are the leading factors that dominate Turkish foreign trade. Rolling density forecasts from the standard versions of the models are compared via Diebold-Mariano (DM) test with the two popular scoring rules. The GARCH model generally outperforms GAS when the conditional distribution is the Normal or its skewed version. We find some evidence for the reverse with Student-t and skewed version, but this lacks statistical support, except for the definite superiority of GAS in USD returns coupled with skewed Student-t. A deeper analysis attributed GAS’s underperformance to its treatment of shocks that are more likely to occur in developing markets. We also report similar findings with DM tests using two loss functions for VaR forecasts, whereas the results of the backtesting procedures are inconsistent across risk levels.

Keywords: GARCH model, GAS model, Density forecast, Density score function, Forecast evaluation, Value-at-risk

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APA

Özgül, A.U. (2025). GAS or GARCH: A comparison of density and VaR forecasts in Turkish FX and stock markets. Istanbul Business Research, 54(1), 58-86. https://doi.org/10.26650/ibr.2025.54.1577152

AMA

Özgül A U. GAS or GARCH: A comparison of density and VaR forecasts in Turkish FX and stock markets. Istanbul Business Research. 2025;54(1):58-86. https://doi.org/10.26650/ibr.2025.54.1577152

ABNT

Özgül, A.U. GAS or GARCH: A comparison of density and VaR forecasts in Turkish FX and stock markets. Istanbul Business Research, [Publisher Location], v. 54, n. 1, p. 58-86, 2025.

Chicago: Author-Date Style

Özgül, Ali Ulvi,. 2025. “GAS or GARCH: A comparison of density and VaR forecasts in Turkish FX and stock markets.” Istanbul Business Research 54, no. 1: 58-86. https://doi.org/10.26650/ibr.2025.54.1577152

Chicago: Humanities Style

Özgül, Ali Ulvi,. “GAS or GARCH: A comparison of density and VaR forecasts in Turkish FX and stock markets.” Istanbul Business Research 54, no. 1 (Jun. 2025): 58-86. https://doi.org/10.26650/ibr.2025.54.1577152

Harvard: Australian Style

Özgül, AU 2025, 'GAS or GARCH: A comparison of density and VaR forecasts in Turkish FX and stock markets', Istanbul Business Research, vol. 54, no. 1, pp. 58-86, viewed 26 Jun. 2025, https://doi.org/10.26650/ibr.2025.54.1577152

Harvard: Author-Date Style

Özgül, A.U. (2025) ‘GAS or GARCH: A comparison of density and VaR forecasts in Turkish FX and stock markets’, Istanbul Business Research, 54(1), pp. 58-86. https://doi.org/10.26650/ibr.2025.54.1577152 (26 Jun. 2025).

MLA

Özgül, Ali Ulvi,. “GAS or GARCH: A comparison of density and VaR forecasts in Turkish FX and stock markets.” Istanbul Business Research, vol. 54, no. 1, 2025, pp. 58-86. [Database Container], https://doi.org/10.26650/ibr.2025.54.1577152

Vancouver

Özgül AU. GAS or GARCH: A comparison of density and VaR forecasts in Turkish FX and stock markets. Istanbul Business Research [Internet]. 26 Jun. 2025 [cited 26 Jun. 2025];54(1):58-86. Available from: https://doi.org/10.26650/ibr.2025.54.1577152 doi: 10.26650/ibr.2025.54.1577152

ISNAD

Özgül, AliUlvi. “GAS or GARCH: A comparison of density and VaR forecasts in Turkish FX and stock markets”. Istanbul Business Research 54/1 (Jun. 2025): 58-86. https://doi.org/10.26650/ibr.2025.54.1577152

Volume 54, Issue 12025, P. 58-86

TIMELINE

Submitted	31.10.2024
Accepted	07.03.2025
Published Online	15.05.2025

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