The Information Content of Implied Volatility: Evidence from Australia

Frijns, Bart; Tallau, Christian; Tourani‐Rad, Alireza

doi:10.2139/ssrn.1246142

Cited by 35 publications

(41 citation statements)

References 36 publications

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“…To validate the hypothesis stating that there is a negative relationship between contemporaneous returns of the underlying stocks index and implied volatility variations (H3), we expect a significant and negative value of the coefficient as evidenced by several studies as Fleming et al (1995); Whaley (2000); Frijns et al (2010);Ryu (2012) among others. In addition, considering the absolute value of contemporary daily returns from the underlying stock index allows us to highlight the existence of an asymmetrical relationship between implied volatility variations and current returns from underlying stocks indices.…”

Section: Implied Volatility Indices and The Underlying Stock Returnsmentioning

confidence: 59%

“…Similarly, it contains all the information regarding the future volatility that is not included in the historical volatility. More recently, Frijns et al (2010) examined the performance of the information content of the implied volatility index AVX calculated from options market prices from the Australian stock index S & P / ASX 200, compared to alternative models for volatility forecasting (the GARCH models and "RiskMetrics" approach) for various forecast horizons. Thus, in sample empirical results showed that implied volatility index contains additional information with respect to the model GJR-GARCH (1,1).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Thus, in sample empirical results showed that implied volatility index contains additional information with respect to the model GJR-GARCH (1,1). Furthermore, through the out of sample ones Frijns et al (2010) noted that implied volatility index AVX is the best predictor of future realized volatility dominating volatility forecasting under the approach "RiskMetrics" and GJR-GARCH (1,1).…”

Section: Literature Reviewmentioning

confidence: 99%

See 2 more Smart Citations

Dynamics of the Relationship between Implied Volatility Indices and Stock Prices Indices: The Case of European Stock Markets

Emna

Myriam

2017

Asian Economic and Financial Review

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Section: Implied Volatility Indices and The Underlying Stock Returnsmentioning

confidence: 59%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

See 1 more Smart Citation

Dynamics of the Relationship between Implied Volatility Indices and Stock Prices Indices: The Case of European Stock Markets

Emna

Myriam

2017

Asian Economic and Financial Review

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“…The VIX, the most well-known volatility index of the US market, plays a successful role as a market indicator and fear gauge measure. Numerous articles that examine the fitting and forecasting ability of the US' implied volatility index demonstrate its superiority over historical volatilities (Banerjee et al, 2007;Becker et al, 2007;Carr and Wu, 2006;Corrado and Miller, 2005;Frijns et al, 2010;Jiang and Tian, 2007;Konstantinidi et al, 2008;Simon, 2003). Some studies also investigate implied volatility indices for quantifying market risk and for risk management purposes (Giot, 2005;Kim and Ryu, 2015b).…”

Section: Introductionmentioning

confidence: 99%

Effects of the US Stock Market Return and Volatility on the VKOSPI

2015

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The KOSPI (Korea Composite Stock Price Index) 200 options are one of the most actively traded derivatives in the world. This paper empirically examines (a) the statistical properties of the Korea's representative implied volatility index (VKOSPI) derived from the KOSPI 200 options and (b) the macroeconomic and financial variables that can predict the implied volatility process of the index, using augmented heterogeneous autoregressive (HAR) models with exogenous covariates. The results suggest that the elaborate HAR framework is proficient at describing the dynamics of the VKOSPI and that some domestic macroeconomic variables explain the VKOSPI. More importantly, we find that the stock market return and implied volatility index of the US market (i.e., the S&P 500 spot return and the VIX from the S&P 500 options) play a key role in predicting the level of the VKOSPI and explaining its dynamics, and their explanatory power dominates that of domestic macro-finance variables. Further, while the domestic stock market return does not predict the VKOSPI, the US stock market return does so rather well. When two global factors, both the US stock market return and the US implied volatility index, are incorporated into the HAR framework, the model exhibits the best performance in terms of both in-sample fitting and out-of-sample forecasting ability. JEL C22 C50 G14 G15

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“…In addition, they observe that the information extracted from S&P 500 index options and the information recovered from VIX options significantly improve all the prediction on the S&P 500 index. The studies of Frijns et al (2010) and Dowling and Muthuswamy (2005) on the Australian stock market based on implied volatility index show that the implied volatility indices contain information about both stock market return and future volatility.…”

Section: Introductionmentioning

confidence: 99%

The information content of implied volatility index (India VIX)

Shaikh

Padhi

2013

Glob Bus Perspect

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This paper examines the predictive ability of India VIX as the best forecast of realized return volatility. This study takes into account the implied volatility index (India VIX), also known as the investors fear gauge index. We have employed OLS, 2SLS procedure and quantile regression to study the predictive power of implied volatility index. Empirical results show that India VIX is the best estimate of future realized return volatility. The Hausman specification test analyzes that implied volatility is measured with the errors; consequently, instrumental variable technique is used. The 2SLS estimation procedure shows that 2SLS estimates are more consistent than the simple OLS. Finally, the 2SLS procedure explains that historical volatility does not contain valuable information what already contained in the implied volatility. The implied volatility best subsumes the marketwide information to explain the future volatility. This study explains that Asian implied volatility indices also subsumes the information regarding the future volatility like the US and European volatility indices.

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The Information Content of Implied Volatility: Evidence from Australia

Cited by 35 publications

References 36 publications

Dynamics of the Relationship between Implied Volatility Indices and Stock Prices Indices: The Case of European Stock Markets

Dynamics of the Relationship between Implied Volatility Indices and Stock Prices Indices: The Case of European Stock Markets

Effects of the US Stock Market Return and Volatility on the VKOSPI

The information content of implied volatility index (India VIX)

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