Forward looking information in S&P 500 options

Scott I White, Ralf Becker and Adam Clements

No 233, Econometric Society 2004 Australasian Meetings from Econometric Society

Abstract: Implied volatility generated from observed option prices reflects market expectations of future volatility. This paper determines whether or not, implied volatilities, and hence market expectations, contain any genuinely forward looking information not already captured by historical information. Historical information is represented by current levels of volatility and model based forecasts using a variety of volatility models. The VIX index, constructed from S&P 500 options data is the measure of implied volatility used in this study. Once accounting for historical information, VIX appears to contain no forward looking information regarding future S&P 500 volatility

Keywords: Implied volatility; information; volatility forecasts; volatility models; realized volatility (search for similar items in EconPapers)
JEL-codes: C13 C22 G00 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-ets, nep-fin and nep-rmg
Date: 2004-08-11
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Persistent link: http://EconPapers.repec.org/RePEc:ecm:ausm04:233

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