Forecasting exchange rate volatility: a multiple horizon comparison using historical, realized and implied volatility measures

David T. L. Siu and John Okunev
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David T. L. Siu: Department of Accounting & Finance, Monash University, Melbourne, Australia, Postal: Department of Accounting & Finance, Monash University, Melbourne, Australia
John Okunev: Global Alpha Portfolio Management Pty Ltd, Postal: Global Alpha Portfolio Management Pty Ltd

Journal of Forecasting, 2009, vol. 28, issue 6, 465-486

Abstract: Recent studies suggest realized volatility provides forecasts that are as good as option-implied volatilities, with improvement stemming from the use of high-frequency data instead of a long-memory specification. This paper examines whether volatility persistence can be captured by a longer dataset consisting of over 15 years of intra-day data. Volatility forecasts are evaluated using four exchange rates (AUD|USD, EUR|USD, GBP|USD, USD|JPY) over horizons ranging from 1 day to 3 months, using an expanded set of short-range and long-range dependence models. The empirical results provide additional evidence that significant incremental information is found in historical forecasts, beyond the implied volatility information for all forecast horizons. Copyright © 2008 John Wiley & Sons, Ltd.

Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:jof:jforec:v:28:y:2009:i:6:p:465-486

DOI: 10.1002/for.1090

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