# 11-020/4 (2011-01-31)

Lennart F. Hoogerheide, Erasmus University Rotterdam; David Ardia, aeris CAPITAL; Nienke Corre
GARCH, Bayesian, KLIC, censored likelihood
JEL codes:
C11, C52, C53, C58

This discussion paper resulted in an article in Economics Letters, 2012, 116(3), 322-325.

Using well-known GARCH models for density prediction of daily S&P 500 and Nikkei 225 index returns, a comparison is provided between frequentist and Bayesian estimation. No significant difference is found between the qualities of the forecasts of the whole density, whereas the Bayesian approach exhibits significantly better left-tail forecast accuracy.