Forecasting Vix

Stavros Degiannakis

MPRA Paper from University Library of Munich, Germany

Abstract: Implied volatility index of the S&P500 is considered as a dependent variable in a fractionally integrated ARMA model, whereas volatility measures based on interday and intraday datasets are considered as explanatory variables. The next trading day’s implied volatility forecasts provide positive average daily profits. All the forecasting information is provided by the VIX index itself. There is no incremental predictability from both realized volatility computed from intraday data and conditional volatility extracted from an Arch model. Hence, neither the interday volatility nor the use of intraday data yield any added value in forecasting the S&P500 implied volatility index. However, an agent cannot utilize VIX predictions in creating abnormal returns in implied volatility futures market.

Keywords: ARCH; ARFIMAX; Fractional Integration; Volatility Forecasting; VIX Index (search for similar items in EconPapers)
JEL-codes: C32 C52 C53 G15 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (9)

Published in Journal of Money, Investment and Banking 4 (2008): pp. 5-19

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:96307

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