GARCH models accurately forecast hedge ratios in emerging European stock markets.
The article forecasts hedge ratios in emerging European stock futures markets using seven different GARCH models. Data from Greece, Hungary, Poland, and the UK from 2000 to 2014 is analyzed. The GARCH model provides the most accurate forecasts in five cases, with GARCH-ECM, GARCH-X, and GARCH-GJR also performing well. The GARCH-BEKK and GARCH-GJR models show high forecasting ability based on portfolio return differences.