VIX and stock market volatility predictability: A new approach

Zhichao Liu, Jing Liu, Qing Zeng and Lan Wu

Finance Research Letters, 2022, vol. 48, issue C

Abstract: In this paper, an effective way to forecast stock volatility by selecting dynamic thresholds of the VIX is explored. We examine the predictability of the VIX and its above-threshold values for the S&P 500. Our results indicate that selecting thresholds for the VIX can significantly improve the forecast accuracy. From the out-of-sample R2 statistics, we find that the above-threshold VIX has a better forecasting performance during expansions.

Keywords: Volatility forecasting; Realized volatility; VIX; Threshold (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:48:y:2022:i:c:s1544612322001696

DOI: 10.1016/j.frl.2022.102887

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