The Information Contents of VIX Index and Range-based Volatility on Volatility Forecasting Performance of S&P 500

Jui-Cheng Hung (), Ren-Xi Ni () and Matthew C. Chang ()
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Jui-Cheng Hung: Lunghwa University of Science and Technology
Ren-Xi Ni: Takming University of Science and Technology
Matthew C. Chang: Hsuan Chuang University

Economics Bulletin, 2009, vol. 29, issue 4, 2592-2604

Abstract: In this paper, we investigate the information contents of S&P 500 VIX index and range-based volatilities by comparing their benefits on the GJR-based volatility forecasting performance. To reveal the statistical significance and ensure obtaining robust results, we employ Hansen's SPA test (2005) to examine the forecasting performances of GJR and GJR-X models for the S&P500 stock index. The results indicate that combining VIX and range-based volatilities into GARCH-type model can both enhance the one-step-ahead volatility forecasts while evaluating with different kinds of loss functions. Moreover, regardless of under-prediction, GJR-VIX model appears to be the most preferred, which implies that VIX index has better information content for improving volatility forecasting performance.

Keywords: Range-based volatilities; GJR-based volatility forecasting; VIX index; SPA test (search for similar items in EconPapers)
JEL-codes: C5 G1 (search for similar items in EconPapers)
Date: 2009-10-16
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Citations: View citations in EconPapers (2)

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