Comparative Approach to the Backward Elimination and for-ward Selection Methods in Modeling the Systematic Risk Based on the ARFIMA-FIGARCH Model

Advances in Mathematical Finance and Applications

مقاله 2، دوره 2، شماره 4، اسفند 2017، صفحه 11-30   

نوع مقاله: Research Paper

شناسه دیجیتال (DOI): 10.22034/amfa.2017.536263

نویسندگان

Nemat Rastgoo؛ Hossein Panahian^*

Department of accounting, Kashan Branch, Islamic Azad University, Kashan, Iran

چکیده

The present study aims to model systematic risk using financial and accounting variables. Accordingly, the data for 174 companies in Tehran Stock Exchange are extracted for the period of 2006 to 2016. First, the systematic risk index is estimated using the ARFIMA-FIGARCH model. Then, based on the research background, 35 affective financial and accounting variables are simultaneously used with the help of the backward elimination and forward selection method for modeling. After analyzing and evaluating the variables in Eviews software, the four variables of debt ratio (CL. E), size (SIZE), net profit to sales ratio (NETP. S), and interest rate coverage ratio (ICR) are selected in the backward elimination method. In the forward selection method, in addition to the above variables, operating profit margin (OPM) is also chosen. The estimated model of these variables in both methods shows a low ratio of R2 coefficient that is approximately 7%. In the test case, the model of forward selection method has less error in all four criteria of root mean squared error (RMSE), mean absolute error (MAE), mean absolute percentage error (MAPE) and Tile coefficient (TIC) compared to the backward elimination method.

کلیدواژه‌ها

Systematic Risk؛ Arfima-Figarch Model؛ Backward elimination Method؛ Forward selection Approach

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