The economic value of volatility timing using a range-based volatility model

Ray Chou and Nathan Liu

Journal of Economic Dynamics and Control, 2010, vol. 34, issue 11, 2288-2301

Abstract: There is growing interest in utilizing the range data of asset prices to study the role of volatility in financial markets. In this paper, a new range-based volatility model was used to examine the economic value of volatility timing in a mean-variance framework. We compared its performance with a return-based dynamic volatility model in both in-sample and out-of-sample volatility timing strategies. For a risk-averse investor, it was shown that the predictable ability captured by the dynamic volatility models is economically significant, and that a range-based volatility model performs better than a return-based one.

Keywords: Asset; allocation; CARR; DCC; Economic; value; Range; Volatility; timing (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:34:y:2010:i:11:p:2288-2301

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