Machine Learning-Based Volatility Forecasting and Systemic Risk Dynamics in Indonesian State-Owned Banks
DOI:
https://doi.org/10.19139/soic-2310-5070-3546Keywords:
Volatility forecasting, Systemic risk, Machine learning, Random Forest, Gradient Boosting, Realized volatility, Financial stability, InterconnectednessAbstract
This study evaluates volatility forecasts and systemic-risk indicators for four Indonesian state-owned banks (BBRI, BBTN, BMRI, and BBNI) from January 2010 to December 2025. Random Forest (RF) and Gradient Boosting (GB) models use information available at each forecast origin and are tuned by expanding-window validation. We compare them on a common 774-day test sample with a Random Walk, historical mean, moving average, HAR, GARCH(1,1), EGARCH, and GJR-GARCH. The GARCH-family models produce the most accurate 20-day rolling-volatility forecasts, with out-of-sample R^2 values of 0.9793–0.9838. RF attains R^2 values of 0.8929–0.9459 and does not outperform persistence. HAC-corrected Diebold–Mariano tests favor the Random Walk over RF and GB, but favor the GARCH-family models over the Random Walk. The first principal component of the Systemic Risk Index (SRI) explains 76.7% of component variation and correlates 0.999 with the equal-weight index; ∆CoVaR estimates indicate downside dependence. After 10-basis-point switching costs, an ex-ante RF volatility-timing rule improves Sharpe ratios for BBRI, BMRI, and BBNI, but not BBTN. RF and GB revealbank-specific nonlinear associations, whereas the econometric models provide the most accurate point forecasts.Downloads
Published
2026-08-16
How to Cite
Heryana, N., Nugraha, N., Sari, M., Disman, D., Heryana, T., & Mayasari, R. (2026). Machine Learning-Based Volatility Forecasting and Systemic Risk Dynamics in Indonesian State-Owned Banks. Statistics, Optimization & Information Computing, 16(4), 3669–3682. https://doi.org/10.19139/soic-2310-5070-3546
Issue
Section
Research Articles
License
Copyright (c) 2026 Nono Heryana, Nugraha Nugraha, Maya Sari, Disman Disman, Toni Heryana, Rini Mayasari

This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).