Is implied volatility an informationally efficient and effective predictor of future volatility?

Ederington, Louis H.; Guan, Wei

doi:10.21314/jor.2002.061

Cited by 70 publications

(52 citation statements)

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“…US CDs with the same maturity were downloaded from the Board of Governors of the Federal Reserve System's web page. 19 Model- …”

Section: Implied Volatilitymentioning

confidence: 99%

Forecasting exchange rate volatility: The superior performance of conditional combinations of time series and option implied forecasts

Benavides¹,

Capistrán²

2012

Journal of Empirical Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: This paper provides empirical evidence that combinations of option implied and time series volatility forecasts that are conditional on current information are statistically superior to individual models, unconditional combinations, and hybrid forecasts. Superior forecasting performance is achieved by both, taking into account the conditional expected performance of each model given current information, and combining individual forecasts. The method used in this paper to produce conditional combinations extends the application of conditional predictive ability tests to select forecast combinations. The application is for volatility forecasts of the Mexican Peso-US Dollar exchange rate, where realized volatility calculated using intra-day data is used as a proxy for the (latent) daily volatility. Terms of use: Documents in

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“…US CDs with the same maturity were downloaded from the Board of Governors of the Federal Reserve System's web page. 19 Model- …”

Section: Implied Volatilitymentioning

confidence: 99%

Forecasting exchange rate volatility: The superior performance of conditional combinations of time series and option implied forecasts

Benavides¹,

Capistrán²

2012

Journal of Empirical Finance

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“…Examples include …rms involved in mergers or acquisitions, reorganized …rms emerging from Chapter 11, …rms undertaking IPOs or SEOs, as well as …rms undertaking large-scale expansions and/or major changes in the composition of debt and equity. 1 Papers focusing on other markets include Blair, Poon and Taylor (2001), Ederington and Guan (2002), Figlewski (1997), Jorion (1995), and Pong, Shackleton, Taylor and Xu (2004). See Poon and Granger (2003) and Granger and Poon (2005) for surveys.…”

Section: Introductionmentioning

confidence: 99%

Option-Implied Measures of Equity Risk

et al. 2009

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“…Also, note that the intercept is not added separately as it is already subsumed in the sector betas. 20 …”

Section: Sector Factorsmentioning

confidence: 99%

“…Those tickers without BICS sector data have been excluded from the regressions reported in Table 4, where the top-2000-by-ADDV universe therefore is based on this somewhat smaller subset of tickers. 20 The BICS sector betas are binary: β iα = 1 if the stock labeled by i belongs to the sector labeled by α = 1, . .…”

Section: Intraday Alphamentioning

confidence: 99%

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4-Factor Model for Overnight Returns

Kakushadze¹

2015

Wilmott

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We propose a 4-factor model for overnight returns and give explicit definitions of our 4 factors. Long horizon fundamental factors such as value and growth lack predictive power for overnight (or similar short horizon) returns and are not included. All 4 factors are constructed based on intraday price and volume data and are analogous to size (price), volatility, momentum and liquidity (volume). Historical regressions a la Fama and MacBeth (1973) suggest that our 4 factors have sizable serial t-statistic and appear to be relevant predictors for overnight returns. We check this by using our 4-factor model in an explicit intraday mean-reversion alpha.

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Is implied volatility an informationally efficient and effective predictor of future volatility?

Cited by 70 publications

References 0 publications

Forecasting exchange rate volatility: The superior performance of conditional combinations of time series and option implied forecasts

Forecasting exchange rate volatility: The superior performance of conditional combinations of time series and option implied forecasts

Option-Implied Measures of Equity Risk

4-Factor Model for Overnight Returns

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