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). 1164–1193. 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
UEA Research Groups:	Faculty of Social Sciences > Research Groups > Accounting, Finance and Governance (former - to 2017) Faculty of Social Sciences > Research Groups > Finance Group Faculty of Social Sciences > Research Centres > Centre for Competition Policy
Depositing User:	Pure Connector
Date Deposited:	01 Apr 2016 13:00
Last Modified:	19 Apr 2023 23:56
URI:	https://ueaeprints.uea.ac.uk/id/eprint/58088
DOI:	10.1002/fut.21792

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