E. Hagag, A., A. Alshawadfi, G., A. Nimcale, M. (2020). Comparison of Different Statistical Models for Forecasting Exchange Rate of Somali Shilling Against US Dollar. test, 23(1), 35-76. doi: 10.21608/jsfc.2020.247938
Abd El-Wahab E. Hagag; Gamal A. Alshawadfi; Mohamed A. Nimcale. "Comparison of Different Statistical Models for Forecasting Exchange Rate of Somali Shilling Against US Dollar". test, 23, 1, 2020, 35-76. doi: 10.21608/jsfc.2020.247938
E. Hagag, A., A. Alshawadfi, G., A. Nimcale, M. (2020). 'Comparison of Different Statistical Models for Forecasting Exchange Rate of Somali Shilling Against US Dollar', test, 23(1), pp. 35-76. doi: 10.21608/jsfc.2020.247938
E. Hagag, A., A. Alshawadfi, G., A. Nimcale, M. Comparison of Different Statistical Models for Forecasting Exchange Rate of Somali Shilling Against US Dollar. test, 2020; 23(1): 35-76. doi: 10.21608/jsfc.2020.247938

Comparison of Different Statistical Models for Forecasting Exchange Rate of Somali Shilling Against US Dollar

المجلة العلمية لقطاع کليات التجارة بجامعة الأزهر
Article 4, Volume 23, Issue 1, January 2020, Pages 35-76    PDF (2.72 M)
Document Type: المقالة الأصلية
DOI: 10.21608/jsfc.2020.247938
Authors
Abd El-Wahab E. Hagag; Gamal A. Alshawadfi; Mohamed A. Nimcale*
کلية التجارة بنين بالقاهرة - جامعة الأزهر - طريق النصر - أمام قاعة المؤتمرات - مدينة نصر - القاهرة الرقم البريدي / 11751
Abstract
The main goal of thispaper is to model and forecast the daily exchange rate of Somali Shilling (SOS) against United States Dollar (USD) over the period of 1st January 2009 to 31st December 2018 using Box-Jenkins models and Autoregressive Conditional Hetroskedasticity (ARCH) family models to compare between them and selected an appropriate one.Box-Jenkins models are employed for modeling and forecasting data using the steps of Box-Jenkins methodology.Additionally, non-normality, skewness, leptokurtosis, volatility clustering, and existence of ARCH effects in the residuals are observed in the data, therefore, ARCH family models which include ARCH, Generalized ARCH (GARCH), Exponential(EGARCH), and Threshold (TGARCH) are developed under three error distributions namely normal distribution, t-student distribution andGeneralized Error Distribution(GED). The empirical analysis has shown that ARMA(0, 6) is the most appropriate model for the estimated models using Akaike Information Criteria (AIC)  and Schwarz Information Criteria (SIC) as a selection criteria and also for the forecasted models usingRoot Mean Square Error (RMSE),Mean Absolute Error (MAE) andMean Absolute Percentage Error (MAPE) as forecasting accuracywhile estimating and forecasting the conditional variance of volatility models, it was found that ARCH(6) under t-student is the best model. After comparing between the models, the result declared that ARCH family models are superior to Box-Jenkins. Moreover, Diebold Mariano(1995) test is applied and revealed that the ARMA models and ARCH family models have same predictive ability whichimplies that the DM (1995) test does not prefer any model over the other.
Keywords
Somali Shilling; Box-Jenkins; Volatility models; Conditional variance; Exchange rate return
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