Pulikandala, Nithish Kumar, Umeorah, Nneka  ORCID: https://orcid.org/0000-0002-0307-5011 and Alochukwu, Alex
2026.
Regime-dependent graph neural networks for enhanced volatility prediction in financial markets.
Mathematics
14
(2)
, 289.
10.3390/math14020289
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Abstract
Accurate volatility forecasting is essential for risk management in increasingly interconnected financial markets. Traditional econometric models capture volatility clustering but struggle to model nonlinear cross-market spillovers. This study proposes a Temporal Graph Attention Network (TemporalGAT) for multi-horizon volatility forecasting, integrating LSTM-based temporal encoding with graph convolutional and attention layers to jointly model volatility persistence and inter-market dependencies. Market linkages are constructed using the Diebold–Yilmaz volatility spillover index, providing an economically interpretable representation of directional shock transmission. Using daily data from major global equity indices, the model is evaluated against econometric, machine learning, and graph-based benchmarks across multiple forecast horizons. Performance is assessed using MSE, R2, MAFE, and MAPE, with statistical significance validated via Diebold–Mariano tests and bootstrap confidence intervals. The study further conducts a strict expanding-window robustness test, comparing fixed and dynamically re-estimated spillover graphs in a fully out-of-sample setting. Sensitivity and scenario analyses confirm robustness across hyperparameter configurations and market regimes, while results show no systematic gains from dynamic graph updating over a fixed spillover network.
| Item Type: | Article |
|---|---|
| Date Type: | Published Online |
| Status: | Published |
| Schools: | Schools > Mathematics |
| Subjects: | Q Science > QA Mathematics |
| Publisher: | MDPI |
| ISSN: | 2227-7390 |
| Date of First Compliant Deposit: | 16 January 2026 |
| Date of Acceptance: | 7 January 2026 |
| Last Modified: | 19 Jan 2026 15:00 |
| URI: | https://orca.cardiff.ac.uk/id/eprint/183961 |
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