The Forecast Performance of Competing Implied Volatility Measures: The Case of Individual Stocks

Leonidas Tsiaras

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: This study examines the information content of alternative implied volatility measures for the 30 components of the Dow Jones Industrial Average Index from 1996 until 2007. Along with the popular Black-Scholes and \model-free" implied volatility expectations, the recently proposed corridor implied volatility (CIV) measures are explored. For all pair-wise comparisons, it is found that a CIV measure that is closely related to the model-free implied volatility, nearly always delivers the most accurate forecasts for the majority of the firms. This finding remains consistent for different forecast horizons, volatility definitions, loss functions and forecast evaluation settings.

Keywords: Model-Free Implied Volatility; Corridor Implied Volatility; Volatility Forecasting (search for similar items in EconPapers)
JEL-codes: C22 C53 G13 G14 (search for similar items in EconPapers)
Pages: 35
Date: 2010-02-01
New Economics Papers: this item is included in nep-ets, nep-fmk and nep-for
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: The Forecast Performance of Competing Implied Volatility Measures: The Case of Individual Stocks (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2010-34

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