The information content of implied volatility in light of the jump/continuous decomposition of realized volatility

Pierre Giot and Sébastien Laurent

Journal of Futures Markets, 2007, vol. 27, issue 4, 337-359

Abstract: In the framework of encompassing regressions, the information content of the jump/continuous components of historical volatility is assessed when implied volatility is included as an additional regressor. The authors' empirical application focuses on daily and intradaily data for the S&P100 and S&P500 indexes, and daily data for the associated VXO and VIX implied volatility indexes. The results show that the total explanatory power of the encompassing regressions barely changes when the jump/continuous components are included, although the weekly and monthly continuous components are usually significant. This evidence supports the view that implied volatility has very high information content, even when extended decompositions of past realized volatility are used. Moreover, adding GARCH‐type volatility forecasts in the regressions confirms these results. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27:337–359, 2007

Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (41)

Downloads: (external link)
http://hdl.handle.net/

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:27:y:2007:i:4:p:337-359

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().