Errors in short run forecasts next-day volatility of equity risk premium in the UK and US market: Empirical research before and after the global financial crisis

The current article has focused on the comparison of the equity risk premiums' development in the two largest equity markets in the world, the U. K. and U.S. markets. The investigation has been made through estimating short run forecasts and calculating their errors. Therefore the aim of the study is to estimate errors in short run forecasts next-day volatility of the equity risk premium in the UK and U.S. markets. As the estimation method it used GARCH (1,2). It is obtained daily data for the period from 1999 to March 2014. The results have clearly proved that errors of forecasts are still at a higher level nowadays, than before the global financial crisis. Finally, it created a motivation for a future research in that area due to differences between types of financial systems. (C) 2014 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/3.0/).