Forecasting Bitcoin and Ethereum risk measures through MSGARCH models

Recent studies have suggested that more complex models than GARCH are better suited for forecasting cryptocurrency risk measures, such as Value-at-Risk and Expected Shortfall. Among these studies, some highlight the advantages of MSGARCH models over traditional GARCH models. While improvements over single-regime GARCH models have been observed by using MSGARCH, the literature has only focused on the MSGARCH specification proposed by Haas, Mittnik and Paolella (Journal of Financial Econometrics, 2004) overlooking several other well-established MSGARCH specification alternatives. In this paper, we illustrate that exploring alternative MSGARCH specifications can lead to improvements in risk measure performance, emphasizing the potential benefits of using several specifications.