An International Comparison of Implied, Realized and GARCH Volatility Forecasts

Kourtis, Apostolos, Markellos, Raphael N. and Symeonidis, Lazaros (2016) An International Comparison of Implied, Realized and GARCH Volatility Forecasts. Journal of Futures Markets, 36 (12). ISSN 0270-7314

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    Abstract

    We compare the predictive ability and economic value of implied, realized, and GARCH volatility models for 13 equity indices from 10 countries. Model ranking is similar across countries, but varies with the forecast horizon. At the daily horizon, the Heterogeneous Autoregressive model offers the most accurate predictions, whereas an implied volatility model that corrects for the volatility risk premium is superior at the monthly horizon. Widely used GARCH models have inferior performance in almost all cases considered. All methods perform significantly worse over the 2008–09 crisis period. Finally, implied volatility offers significant improvements against historical methods for international portfolio diversification. © 2016 Wiley Periodicals, Inc. Jrl Fut Mark

    Item Type: Article
    Uncontrolled Keywords: implied volatility,realized volatility,volatility risk premium,financial crisis,international diversification
    Faculty \ School: Faculty of Social Sciences > Norwich Business School
    Depositing User: Pure Connector
    Date Deposited: 01 Apr 2016 14:00
    Last Modified: 01 Dec 2018 01:03
    URI: https://ueaeprints.uea.ac.uk/id/eprint/58088
    DOI: 10.1002/fut.21792

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