German stock market forecasts revolutionized with new factor-GARCH models!
The article explores different models to predict the returns and variance of German stocks. By using factor structures, the researchers aim to simplify the modeling of stock returns. They consider various dynamic factor models with GARCH dynamics and different distributions for the disturbances. The study compares the accuracy of forecasts based on these models with other forecasting methods like individual GARCH models, static factor models, and simple forecasting techniques.