Modeling asymmetric volatility in weekly Dutch temperature data |
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Affiliation: | 1. Bremen Marine Ecology (BreMarE), Marine Zoology, University of Bremen, P.O. Box 330440, 28334 Bremen, Germany;2. Alfred Wegener Institute, Helmholtz Centre for Polar and Marine Research (AWI), P.O. Box 120161, 27570 Bremerhaven, Germany |
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Abstract: | In addition to clear-cut seasonality in mean and variance, weekly Dutch temperature data appear to have a strong asymmetry in the impact of unexpectedly high or low temperatures on conditional volatility. Furthermore, this asymmetry also shows fairly pronounced seasonal variation. To describe these features, we propose a univariate seasonal time series model with asymmetric conditionally heteroskedastic errors. We fit this (and other, nested) model(s) to 25 years of weekly data. We evaluate its forecasting performance for 5 years of hold-out data and find that the imposed asymmetry leads to better out-of-sample forecasts of temperature volatility. |
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