Economic gains of realized volatility in the Brazilian stock market

Marcio Garcia, Marcelo Medeiros () and Francisco Eduardo de Luna e Almeida Santos ()

Brazilian Review of Finance, 2014, vol. 12, issue 3, 319-349

Abstract: This paper evaluates the economic gains associated with following a volatility timing strategy based on a multivariate model of realized volatility. To study this issue, we build a high frequency database with the most actively traded Brazilian stocks. Comparing with traditional volatility methods, we find that, when estimation risk is controlled, economic gains associated with realized measures perform well and increase proportionally to the target return. When expected returns are bootstrapped, however, performance fees are not significant, which is an indication that economic gains of realized volatility are offset by estimation risk.

Keywords: Realized volatility; utility; forecasting (search for similar items in EconPapers)
JEL-codes: G11 G17 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Economic gains of realized volatility in the Brazilian stock market (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:brf:journl:v:12:y:2014:i:3:p:319-349

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