Forecasting returns using a GARCH model
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Hi!
I am struggling with correctly understanding how to forecast stock returns using GARCH models in MATLAB. Specifically I want to estimate a GJR-GARCH(1,1) model. I am assuming the following specifications of returns
r_{t} = mu + h_{t} z_{t}
where z is N(0,1). To obtain the one period ahead stock returns forecasts I firstly use the ARMAX-GARCH-K toolbox to obtain the mean and variance forecasts. This is where I am not sure how to obtain the predicted stock returns from my partial results. I am attaching a piece of reproducible code.
load Data_EquityIdx
nasdaq = Dataset.NASDAQ;
r = price2ret(nasdaq);
[MF, VF] = garchfor(r, 'GJR', 'GAUSSIAN', 0, 0, 1, 1, 1);
I would appreciate any kind of help :)
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