Efficient predictability of stock return volatility: The role of stock market implied volatility
Fenghua Wen and
The North American Journal of Economics and Finance, 2020, vol. 52, issue C
This study examines the predictability of stock market implied volatility on stock volatility in five developed economies (the US, Japan, Germany, France, and the UK) using monthly volatility data for the period 2000 to 2017. We utilize a simple linear autoregressive model to capture predictive relationships between stock market implied volatility and stock volatility. Our in-sample results show there exists very significant Granger causality from stock market implied volatility to stock volatility. The out-of-sample results also indicate that stock market implied volatility is significantly more powerful for stock volatility than the oil price volatility in five developed economies.
Keywords: Stock volatility; Stock market implied volatility; Predictive regression; Out-of-sample performance (search for similar items in EconPapers)
JEL-codes: C32 C53 G12 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:52:y:2020:i:c:s1062940820300711
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